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Buffett: Euro's End Not 'Unthinkable,' No Nation Deserves Free Ride

Thursday, 24 Mar 2011 11:35 AM

It's not unthinkable that the euro could collapse, says legendary investor Warren Buffett. "I know some people think it's unthinkable ... I don't think it's unthinkable," Buffett tells CNBC.

Nevertheless, European authorities will carry out "huge efforts" to preserve the currency.

In the meantime, Buffett adds, struggling European countries like Portugal will have to work their way out of their crises and stop relying on other European countries for help.

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Warren Buffett
"You can't have three or four or five countries that are in effect free-riding on the other countries. That won't work over time — they have to get their fiscal houses in reasonable harmony," Buffett says.

For now, European currency woes won't seriously affect Buffett's investment empire, Berkshire Hathaway, as Buffett points out that currency woes are nothing new.

"It isn't the end of the world, but a lot of adjustment would be needed if the euro proved to be in real trouble."

Portugal, meanwhile, is struggling more than ever to avoid financial collapse in wake of the government's recent resignation, a move global markets interpreted to mean the debt-ridden country will lose its yearlong battle to avoid asking for an international bailout, the Associated Press reports.

Portugal has fought hard to avoid asking its EU partners and the International Monetary Fund for help. Doing so would mean accepting lending terms calling for tight fiscal conditions that limit the country's ability to set its own economic policies and ultimately decide its own fate.

However, global financial institution Barclays Capital says that market pressure on Lisbon to seek a bailout won't let up, adding that "an EU-IMF program looks increasingly likely given (the) adverse market funding conditions" for Portugal, the Associated Press reports.

"In the near term, we suspect bond yields will keep pushing higher, if only because uncertainty will prevail," according to Barclays Capital.

Portugal isn't alone, as neighboring Spain is also trying to right its economic ship. Moody's credit ratings agency has downgraded the debt of 30 Spanish banks, the Associate Press reports.

While the ratings for the three largest banks remain untouched, the other ratings revisions signify that trouble may be brewing in the Iberian Peninsula.

The Spanish government, however, remains optimistic.

"We have to keep doing what we have been doing so far — continue to enact reforms, live up to our commitments, strengthen our economy," says Spanish Finance Minister Elena Salgado.

Spain has enacted a number of austerity measures to tackle its economic problems that arose after the housing collapse came amid a tough recession.

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It's not unthinkable that the euro could collapse, says legendary investor Warren Buffett. I know some people think it's unthinkable ... I don't think it's unthinkable, Buffett tells CNBC. Nevertheless, European authorities will carry out huge efforts to preserve the...
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2011-35-24
 

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