Tags: parisis | europe | euro | crisis

Europe Only Treating Symptoms, Not Causes, of Crisis

By
Friday, 30 Sep 2011 08:30 AM Current | Bio | Archive

Treasury Secretary Timothy Geithner recently warned that failure to combat the Greek-led turmoil could lead to “cascading default, bank runs and catastrophic risk.”

President Barack Obama, replying to a question about U.S. economic growth at a roundtable discussion on Hispanic issues at the White House, criticized the response of European governments to the eurozone’s debt crisis. He said the turmoil continues to be a drag on the U.S. economy (In my opinion, he’s absolutely right on this subject).

“Some of the challenges that we’ve had over the last several months actually have to do with the fact that, in Europe, we haven’t seen them deal with their banking system and their financial system as effectively as they needed to,” Obama said.

The supervisory board chairman of China’s sovereign wealth fund, the China Investment Corp. (CIC), is also concerned about the eurozone debt situation. China cannot be expected to buy high-risk eurozone debt without a clear picture of a crisis solution, CIC supervisory board chairman Jin Liqun said.

As an investor I would take the concerns of these “world players” seriously as their serious doubts on a positive final outcome on the ongoing eurozone debt crisis are extremely (unfortunately) well-founded.

Germany’s vote for an enhancement of the EFSF (the European Financial Stability Facility, created for preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty) will not end the crisis.

Keep in mind that the enhancement of the EFSF only tries to address some of the symptoms of the crisis, but not the root causes of the crisis.

The situation probably could intensify, rather than being cured, somewhere down the road and end up an even-worse contaminating chaos.

As long there isn’t a conceivable political solution under which the eurozone association would have the necessary democratic legitimacy, there won’t be an end to the EU uncertainties and lack of credibility.

All this is developing at a moment when the world economy is practically stagnating (U.S. GDP currently at +1.3% q/q annualized growth), U.S. economy-wide inflation was revised up incrementally to 2.5 percent annualized and while unemployment remaining unacceptably high.

So, Europe, the U.S. and other important countries won’t grow out of their problems very soon. My preference hasn’t changed at all and I remain full “risk off.” I’m not in a hurry.

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
HansParisis
Treasury Secretary Timothy Geithner recently warned that failure to combat the Greek-led turmoil could lead to cascading default, bank runs and catastrophic risk. President Barack Obama, replying to a question about U.S. economic growth at a roundtable discussion on...
parisis,europe,euro,crisis
386
2011-30-30
Friday, 30 Sep 2011 08:30 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved