Tags: eu | europe | european | crisis | bailout | spain | portugal

Europeans Fear Domino Effect of Financial Crises

Sunday, 28 Nov 2010 12:33 PM

Fears that the fallout from the Irish bailout will punish European markets as a whole are still spreading, and investors are taking note.

Spanish and Portuguese bond prices are falling, the euro is weakening and stock markets on both sides of the Atlantic are taking a beating on fears that the recent Irish bailout underscores problems elsewhere in the European economy.

"I think that's the market's realization; that these are systemic problems that are going to need a systemic solution," Brian Yelvington, fixed-income strategist at Knight Capital, tells the Wall Street Journal.

"This is not a one-off problem with an individual country."

Contagion, broadly defined as when losses or fears of losses in one market shatters confidence in other markets, can inflict damage across wide swathes of the globe.  In this case, Portugal and Spain are in the spotlight in wake of the Irish bailout.

While Portugal and Spain may be home to economic problems somewhat different than those in Ireland, their problems are hefty enough to spark fear among investors both at home and abroad.

Greece and Italy have worried investors, and Belgium is now a source of concern.

"People that are betting on contagion are probably making the right bet here," David Gilmore, a strategist at Foreign Exchange Analytics, tells the Wall Street Journal.

"There's not really anything to stop the markets from pushing the next domino over."

Some European officials are playing down differences among Europe's economies.

"There are no parallels whatsoever between Ireland and Portugal," Jean-Claude Juncker, who leads the group of euro-area finance ministers, tells Belgian newspaper L'Echo, according to Bloomberg. "The budgetary reform plan Portugal put on the table is quite consistent. And the banking sector shows signs of robustness."

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Fears that the fallout from the Irish bailout will punish European markets as a whole are still spreading, and investors are taking note. Spanish and Portuguese bond prices are falling, the euro is weakening and stock markets on both sides of the Atlantic are taking a...
eu,europe,european,crisis,bailout,spain,portugal,belgium,debt
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2010-33-28
Sunday, 28 Nov 2010 12:33 PM
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