Are investors at risk of a fresh banking crisis?
*The Economist, April 28, 2010:
''Investors do not seem convinced that euro-zone governments will be
able to muster the political will to hammer out an agreement. Germany,
as the largest euro member, is vital to any effort to save Greece, but
it is wavering. German public opinion is firmly set against dipping
into the public purse to help the profligate Greeks. Angela Merkel,
Germany's chancellor, is in a tight spot. If she agrees to extend aid
quickly to Greece a voters' backlash back home may send her party
crashing to defeat in regional elections set for May 9th. But if she
sits back and watches Greece slide towards default, the contagion is
sure to spread rapidly to other, bigger EU countries with debt problems
-- Mrs Merkel could then end up being blamed for triggering a far worse
conflagration across Europe, including a fresh banking crisis.
Fears that Greece's fiscal crunch would spread to other euro-area
countries have sent the region's single currency reeling to a one-year
low against the dollar. S&P's decision on Tuesday also to downgrade
thedebt of Portugal by a couple of notches pushed European and world
stock markets lower. Portugal, despite a smaller budget deficit and
lower public debt than Greece, is widely touted as the next European
country that may suffer a sovereign-debt crisis. Portugal's
slow-growing economy, drastic loss of competitiveness and high public
and private indebtedness are all weaknesses that markets might put to
greater test.
If Portugal comes under intense pressure, contagion might then spread
to Ireland, Italy or Spain, the other euro-area countries with some
mixture of big budget deficits, poor growth prospects and high debts.
Only swift and decisive action by the leaders of Europe's big economies
is likely to head off the current crisis.''
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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