Tags: Forbes | End | Bad | euro

Forbes.com: The End in Europe Is Going to Be Bad

By    |   Thursday, 01 Dec 2011 01:16 PM

The "smart money" says the end in Europe is going to be bad. Experts say the moves by central banks only delay the inevitable — the end of the euro as we know it, Robert Lenzner writes for Forbes.com.

Financial insiders believe Greek and Portugal will inevitably default at some point, and Italy and Spain probably will, he reports.

"It is hard for me to see how the euro continues in its current form," an unnamed hedge fund expert told Forbes.com. "It's possible but only if the Germans are willing to give money to southern Europe."
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The European Central Bank is struggling to raise some $1 trillion to help debt-burdened countries like Greece, Italy and Portugal and to help banks holding those countries' bonds.

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(Getty Images photo)
The Federal Reserve and other central banks, in a coordinated effort, eased borrowing costs for financial firms, preventing a liquidity crunch and sent stocks skyrocketing – at least temporarily.

"For central banks to act as they did, the situation must have become extremely severe, or was at least deteriorating badly," writes Michael Schuman for Time.

Schuman as well as many other observers believe the coordinated effort does not solve the underlying problem of the eurozone sovereign debt crisis.

French President Nicolas Sarkozy and German Chancellor Angela Merkel have proposed a fiscal union. A fiscal union might be a real solution, but the proposal in the works might really be only an "austerity union," a way to force more spending cuts and tax hikes with little in return, Schuman says.

Yet just cutting spending won't increase investor confidence, and past year has proven that, he argues. Investors don't believe the countries can change their finances quickly enough to reverse years of fiscal policy. For instance, France has not had a budget surplus since 1974.

Plus, austerity has cut economic growth, reduced government revenues, and made eliminating deficits more difficult.

"Investors know this full well, and that's why they remain wary of the eurozone debt situation even as its political leaders slice away at budgets," he writes.

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The smart money says the end in Europe is going to be bad. Experts say the moves by central banks only delay the inevitable the end of the euro as we know it, Robert Lenzner writes for Forbes.com. Financial insiders believe Greek and Portugal will inevitably default...
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2011-16-01
Thursday, 01 Dec 2011 01:16 PM
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