July 20, 2011
With yet another summit about the debt crisis looming, is there any hope?
A quick scan of the news this morning shows multiple media quoting French Finance Minister Francois Baroin as saying that Europe needs to send a “strong message” about Greece and the Euro.
Is that it? A strong message???
The time for a strong message appeared to be over a year ago. Now with the situation much worse, is there any real chance of survival for Greece in the Euro?
If the financial pages I have been reading are perceptive, then it appears that the problems in Italy are being exacerbated by financial market participants taking them on. This would seem to be the real prize and money making opportunity of a lifetime for many currency related hedge funds.
As might be recalled, when Ireland was bailed out, that suddenly pushed a massive amount of pressure onto Portugal. Did Portugal need a bailout? Not then, no. But Portugal’s debt and financial situation was considered to be worse than Ireland’s.
Thus, by rescuing Ireland, it meant that Portugal would need help sooner or later. The result, more profits for those betting against Portugal.
And so to Italy. If Italy is forced into a rescue plan, then it would seem reasonable that Spain, Belgium and perhaps Hungary as well, will also need help. The result, more profits for those betting against EU Member States, but also catastrophic problems for the European economy.
And you thought this summit was about Greece and their problems? Do the words “tip” and “iceberg” ring any bells???
Rather than sending any sort of message to the markets or to the Greek government or public, I fear that this is their last chance saloon. If the situation gets much worse for EU finance ministers and their debt loads, cutting Greece loose from the euro may become the only viable option.
If that were to happen, the Greek economy would go into meltdown. A currency devaluation, debt default, significant inflation and a much deeper recession would surely follow.
So, no pressure for EU leaders this week then…financialguy