• IP addresses are NOT logged in this forum so there's no point asking. Please note that this forum is full of homophobes, racists, lunatics, schizophrenics & absolute nut jobs with a smattering of geniuses, Chinese chauvinists, Moderate Muslims and last but not least a couple of "know-it-alls" constantly sprouting their dubious wisdom. If you believe that content generated by unsavory characters might cause you offense PLEASE LEAVE NOW! Sammyboy Admin and Staff are not responsible for your hurt feelings should you choose to read any of the content here.

    The OTHER forum is HERE so please stop asking.

Nightmare on Euro Street...

GoFlyKiteNow

Alfrescian
Loyal
Next to the demise of the euro, the implosion of Lehman Brothers Holdings would look like a fairly trivial event.


Nightmare on Euro St spooks world markets
5 May 2010, 0209 hrs Bureau

Renewed concerns that some more European economies such as Hungary and Spain are as vulnerable to debt defaults as Greece spooked stock markets worldwide on Tuesday.

Shares fell across Asia mirroring the weakness in Europe, on worries that turbulence in sovereign credit markets could impact investor risk appetite and reverse flows from stock markets.

“Contagion risks are high, with Portugal first in line but other countries such as Spain and Italy also being watched nervously by the markets,” said Jan Lambregts of Rabobank, in a report.

Spanish stocks tumbled more than five percent on Tuesday as European markets were singed by fears that the fallout from the Greek debt crisis could spread to other volatile eurozone states.

Spanish Prime Minister Jose Luis Rodriguez Zapatero dismissed as "absolute madness" rumours circuling in markets that Spain would ask for a 280-billion-euro bailout from the International Monetary Fund.

"What concerns me is that if a rumour of this nature, which is a huge nonsense, causes an immediate effect on our stock market, we are before a very serious act," he told a news conference in Brussels.

The IMF iteself also said there was "no truth" to the rumors of bailout for Spain.

"Bailout or not, contagion is definitely the talk of the town," said James Hughes, an analyst with CMC Markets in London.

US stocks opened sharply lower on Tuesday as Greece's debt problems continued to rattle investors, with the Nasdaq dropping 2 percent. Striking public workers in Greece challenged their government's bailout-for-austerity deal with the European Union and the International Monetary Fund as investors worried about Athens' ability to enforce deeper spending cuts.

The Dow Jones industrial average fell 116.31 points, or 1.04 percent, at 11,035.52. The Standard & Poor's 500 Index lost 13.40 points, or 1.11 percent, at 1,188.86. The Nasdaq Composite Index dropped 43.32 points, or 1.73 percent, at 2,455.42.

Madrid's benchmark Ibex-35 share index closed down 5.41 percent at 9,859.10 points over the rumours as well as concern that Spain could be hit with credit downgrades from other ratings agencies following a cut by Standard & Poor's last week.

The London FTSE index of leading shares shed 2.56 percent, while in Paris the CAC 40 lost 3.64 percent to close at 3,689.29 points and in Frankfurt the DAX gave up 2.60 percent to finish at 6,006.86.

On Sunday, European nations endorsed an unprecedented 110-billion-euro (146-billion-dollar) bailout package to save Greece from bankruptcy and shore up the euro single currency.

When the euro celebrated its 10th anniversary last year, it seemed to be a solid currency. Only a few eccentrics speculated about whether it may break up one day.

In the past few weeks, Greece has changed all that. The New York-based investment bank, Morgan Stanley, is among those saying the possibility of a euro collapse has to be considered.

Next to the demise of the euro, the implosion of Lehman Brothers Holdings would look like a fairly trivial event.

Of course, we shouldn’t overestimate the likelihood. The deal cobbled together by the European Union and the International Monetary Fund may be enough to keep the Greek trade unions, the German taxpayer, and the hedge funds speculating in the bonds, all happy. Miracles happen — just not that often.

The Greeks don’t appear to be in any mood for the years of grinding austerity that their economy will need. Nor do the Germans seem willing to help out what they see as a bunch of Mediterranean layabouts.

When a relationship is that fundamentally incompatible, even the most skilful marriage counsellor might think it was about time to start talking about how to divide up the assets and calling it a day.

Sound Money

One: Buy German bonds, and sell the DAX index. Germany is one of the most creditworthy countries in the world: It hates budget deficits, runs a big trade surplus, and believes in sound money. But it is being dragged down by spendthrift neighbours that hitched a ride on the currency-union bandwagon. Outside of the euro, German bonds would soar. But so would the “new deutsche mark”, hurting the exporters that dominate the DAX.

Two: Buy the dollar. Sure, it has its own problems. The US budget and trade deficits are huge. Wall Street is under attack from populist, crusading politicians. Its share of the global economy is in long-term decline. But with the euro gone, it would be the only serious reserve currency — at least until China decides to take on that role. Without any competition, the dollar would only strengthen.
 
Top