European Debt Crisis Escalates: Will Spain Be The Next To Fall?

Washington Post:

The debt crisis in Europe escalated sharply Friday as investors dumped Spanish and Portuguese bonds in panicked selling, substantially heightening the prospect that one or both countries may need to join troubled Ireland and Greece in soliciting international bailouts.

Read the whole story: Washington Post

Comments

[parags20]

08:49 AM on 01/13/2011

Entering the Euro is like having to enter the mindset of a German. The cost of money is not the rate but how long you have to work to pay it back.
Once or twice round the block the others will get used to it and for the better - if they make it that is.
http://www.prime-targeting.com/european-debt-worries-heightened-by-lack-of-irish-luck/

[parags20]

02:21 AM on 12/08/2010

The problem with the EU, and especially PIGS is that they were spending too much even before the depression. Greece's debt didn't suddenly magically appear as a result of a recession. It was already there, it just became fatal when the economy went south. The problem for the EU isn't just an economic downturn. If that was the only problem, some stimulus spending could arguably be the answer. The problem for the EU is debt combined with a flat economy.
http://www.financemetrics.com/european-debt-crisis-means-continent-is-on-the-periphery/

[ArchbishopBenevolent]

10:18 PM on 11/28/2010

I am not an economist but having the Euro as a common currency makes traveling in Europe a breeze. Considering the alternatives, you don't have to change currencies every 200 miles.

Ireland had a tax rate of 12 percent (I know that only because a lot of companies in my industry are already heading out there). Now I wonder whether the President Bush's tax breaks also had something to do with banking/housing/financial meltdown of 2008. Most economics seem to favor tax breaks but has anyone studied models that predict meltdowns such as this in response to tax breaks?

[Half-Alien]

08:40 PM on 11/28/2010

So the Euro was a bad idea, Eh... Well hey Invisible College, the World-O won't work either

Stop Spraying Us!

[Linda from Deerfield]

07:52 PM on 11/28/2010

I am grateful that, as best I can tell, the United States and its financial system are not directly responsible for these crises. In effect, though, the U.S. is indirectly responsible, because U.S. insanity with respect to banking and real estate was imitated with abandon in nearly every economy now threatened, and I am sure there is consternation in finally understanding that it was a model for disaster. Doubtless the economic miracle that was America will not easily command the deep admiration of so many people around the world again. I wonder what the repercussions will be.

[AlexABC]

10:22 PM on 11/28/2010

In reality, the EU's loose monetary policy, favored by Germany in particular, fueled many of Europe's "PIIGS" crises. Germany has a gigantic account balance and trade surplus, which suit its own declining demographics and domestic profile (for example, it does not have enough consumers to drive growth, so it uses the PIIGS as proxies), but which are ultimately bad news for the imperiled economies in Ireland et al. Cash is sloshing around everywhere, but it has weighed heavily on the trade-deficit countries which have had to absorb painfully the indulgences of the trade-surplus countries.

The idea that the PIIGS simply were badly behaved, dim-witted speculators who wanted 3 houses in every home is too simplistic: those bubbles do not happen if the EU does not gravitate toward the monetary needs of Germany. It is a two-way street.

In light of that, I do not see the linkage to the US and its alleged "export" of such policies to the rest of the world. If anything, Germany is the developed world's answer to China, which similarly runs a a gigantic account balance and trade surplus, which suit its own declining demographics and domestic profile. China has also fed the PIIGS in addition to Japan and the US. Germany and China currently enjoy robust growth which stems from monopolizing foreign shares of dwindling global consumer demand, rather than cultivating their own. The Euro crisis, however, is the beginning of the end for that particularly unbalanced growth model.

[Linda from Deerfield]

10:17 AM on 11/29/2010

It seems to me impossible that nearly the whole western world should act equally suicidal -- as though there is free lunch and that is how consumers and governments will meet their obligations without any foundation left -- unless there was either a conspiracy or else an unfounded confidence based on watching the U.S. who have strutted their economic prowess for a couple of centuries now. My stomach can't handle the conspiracy view, so you see where that leaves me.

To imply that Germany and China are cheating the rest of us is to imply that the rest of us are helpless, which I simply do not buy. In the beginning, business leaders put Milton Friedman in front of us to sell the idea that a rising tide raises all boats and water does not actually seek its own level. He was a super salesman. However, the vast majority of people do not even know who Milton Friedman was and cannot be expected to run a global economy from their living rooms. Those who would deign to govern are responsible and if they allow themselves to be blindsided by bankers or dead people or China or Germany, then they fail their fellow citizens. The problem is worse for those entrapped by the euro, but the voice of millions must learn to speak, and in the U.S. we have to overcome the delusion that failed economics can be made to succeed. We see it similarly, I think.

[jcarterla]

07:50 PM on 11/28/2010

I think we would be better off as a society if all banks were socialized. Anything that affects the entire society should never be run for profit.

[xanas]

08:13 PM on 11/28/2010

That's a fantastic idea. Why not start with food? We all need food. How dare people profit off it? We can have "cookshops" as imagined in Eugene Richter's Pictures of the Socialistic Future.

I love social democrats. The problem isn't that the Federal Reserve prints too much money or the government creates moral hazard through bailouts. The problem is always the "profit motive" as though they themselves operate entirely for the benefit of all mankind.

You should ask Venezuela how nationalizing banks and nationalizing energy is working out for them with their regular shortages and double digit inflation.

[jcarterla]

08:23 PM on 11/28/2010

Bankers don't want regulations that force them to play fair. That is the problem. Our food supply is currently being taken over by chemical companies like Monsanto. How long before that is destroyed by greed? Comparing Democratic Socialism to Venezuela is just the kind of simplistic comparison I would expect from someone like you. We are not run by an oppressive regime. We are a Democratic Republic. Our bailout of the auto companies has been a resounding success. Republicans would have let them fall, just because they don't like unions.

[zanzig]

06:24 PM on 11/28/2010

Watched a finance reporter on the news recently talk about the PIGS problem: Portugal, Ireland, Greece and Spain. Hadn't heard that before. Don't know if he was referring to the bankers of those countries.

[scott63]

05:42 PM on 11/28/2010

Outlaw banks, outlaw corporations, have governments print as much money as they can and give it to whom ever they deem needy, along with all the physical needs such as food, housing, and medical care.
That sounds ridiculous but you can almost read it between the lines in some of the more liberal post here.

[Steven Travis]

03:50 PM on 11/28/2010

If anyone thinks that our current capitalism based society works - as yourself this:

- When was the last time you played monopoly where everybody won????

[flossophy]

03:59 PM on 11/28/2010

Technically, we have a 'mixed system' of capitalism plus large social democratic/Progressive State interventions into the system.... where the State behaves like a giant monopoly. Guess where the problems are in this arrangement.

[Steven Travis]

04:56 PM on 11/28/2010

Well, the problems are in the fact that the State is forced to take on certain roles because it is well understood - particularly in our society - that the corporations will not. Companies take a scorched earth approach to business. They think short term and have no issues devastating the region they are operating in.

We keep talking about jobs and what the government can do to stimulate job growth, however we have outsourced our manufacturing, our engineering, our technical expertise, etc. What JOBS are left for us to do????

[EpicCatman]

04:04 PM on 11/28/2010

FANNED!

It's ridiculous -- People are being told that capitalism is the best way to prosperity, and the same people who are telling them this, are the one SCREWING THEM from behind.

America is next...

[xanas]

08:32 PM on 11/28/2010

Since the essence of capitalism is trade, we should outlaw trade. That'd do away with capitalism right then and there. Then we can all produce for ourselves. It'll be wonderful. Sharing is allowed of course. We can do lots of that (well... if we can actually make enough to eat without a division of labor... that might be hard for the whole world... but so be it, capitalism is evil!)

[EpicCatman]

03:38 PM on 11/28/2010

IT IS TIME FOR A NEW SYSTEM ! ! !
Trading paper and debt is not a sustainable proposition for the future.

[flossophy]

03:40 PM on 11/28/2010

Having large centralized governments and social dependency programs are disastrousIy unsustainable propositions for the future.

[EpicCatman]

03:58 PM on 11/28/2010

The cause of this financial crisis has nothing to with "large centralized governments" or "social dependency programs" -- GREED had everything to do with it.

It's very important to understand how the financial sector works, in order to understand why greed CANNOT be separated from the financial sector.

[Enroh Mot]

04:06 PM on 11/28/2010

Having large banks run by financial swindlers who get bailed out by the corporate controlled politicians, is a unsustainable proposition for the future.

[pep1]

03:31 PM on 11/28/2010

I am just sensing some kind of casino gambling is going on behind our backs..Some kind of worldwide Enron style game...

[ArchbishopBenevolent]

12:17 PM on 11/28/2010

Anybody notice that the bailout cycles seem to occur with regular frequency across the world: Malaysia, Mexico, Argentina, Iceland, United States, Greece, Ireland etc. I think this may be a way for investment bankers to speculate and seek corporate welfare from taxpayers.

I think the best answer would be for Ireland to default on the loans of its banks. Of course, the taxpayers should bear responsibility for the sovereign debt. Iceland and Argentina did this and it worked. No bailouts for speculators.

[BlairCase]

04:55 PM on 11/28/2010

The consequences of default are pretty severe. The Argentine default essentially shut Argentina out of international markets and slowed the flow of investment into the country, with many creditors filing lawsuits against the government in courts. The default forced Argentina to devalue it peso, with a reulsting 44 percent inflation rate (it's now about 11 percent annually). To regain access to international markets, Argentina is not trying to pay its foreign debt without IMF assistance. The government struck a deal in 2005 to pay back approximately 75% of debt-holders at a deeply discounted rate of 30%. In June 2010, Argentina tried to restructure what remained of the debt with similar conditions to the one in 2005. This debt swap had a participation rate of approximately 70%, which, added to the previous restructuring, led to a total level of 90%. In order to gain total access to international capital markets, Argentina still needs to settle its outstanding debt with the Paris Club nations. On November 15, President Fernandez announced that the Argentine government and the Paris Club reached an agreement to start the renegotiation of the debt. In other words, having defaulted, Argentina is now negotiating to repay it debts.

[ArchbishopBenevolent]

10:08 PM on 11/28/2010

No easy paths on this one. Argentina is doing better than could be expected after the default and the fundamentals of its economy are better. I am not sure that bailing out the other banks and private entities is in Ireland's best long-term interests. It will not prevent the efforts to undermine Spain and Portugal either.

Lending and borrowing money ought never to be risk free.

[cplKlyde]

12:05 PM on 11/28/2010

I admire the tenacity of the trolls on this one. In the face of all facts they continue to pimp the "social spending caused this crisis" lie. Message discipline like that is a wonder to behold.

[itschuck2c]

12:43 PM on 11/28/2010

Ever take a look at what France, Greece and others spend?? Have you not seen the "strikes" over cuts in social spending in those countries and the reasons for said "strikes"?? As in France raising the retirement age from 60?? Or Greece, whos govt. employees close to half the population and can't afford the benefits of those jobs such as retirement and medical because they promised too much??

[Steven Travis]

03:39 PM on 11/28/2010

And why do you think they don't have regular (non gov't jobs?).... probably for the same reason we don't - they import everything from China.

Now, you need to look beyond your nose to see the real problem in our society - but I understand that involves critical thinking and the ability to not guzzle down everything that Rush and Beck force feed you.

[wizedollars]

03:43 PM on 11/28/2010

Watching you repeatedly spit out Fox News talking points is a truly sad thing to behold.

[Decorina]

12:46 PM on 11/28/2010

You have that right - it really makes me wonder.

[intotheabyss]

11:52 AM on 11/28/2010

It seems a lot of people in this country are still blind to what is happening. The middle class is under assault by the global banking elites. The IMF is NOT an economic aid agency, it's a perpetual debt machine that devours the wealth of a country and its people to enrich a tiny elite. If you don't believe it, just compare how well third world countries who refused IMF loans have done compared to those that took loans. The IMF creates poverty on a massive scale. That's what it was designed to do. To those who think the global financial crisis was created by too much social spending, snap out of it! Corporate media has you right where they want you. Totally under their control.

[Decorina]

12:47 PM on 11/28/2010

Yes, economic hit men rule the world. The worst part is that here in the US they work for the banksters. The Rebags don't even know who is stealing from them.

[Steven Travis]

03:41 PM on 11/28/2010

The problem is overall illiteracy and one's inability to think longterm (even 2-3 yrs down the line). We as Americans have seen our educational system assaulted, our family lives assaulted (how many people who have jobs that put in 50-70 hrs /week) and yet we continue to take it because we still believe that hard work will get us to the promised land (5 cars, 12 houses, etc).

We - as a general rule - still DON'T get it.

[2garen]

11:23 AM on 11/28/2010

Every person should read "Confessions of An Economic HitMan.
It is going to affect each and everyone of us and those that say otherwise are either liers or have a very distorted view of reality.

[Decorina]

12:48 PM on 11/28/2010

The follow up book is even better. And, BTW I'd go with liars. Fanned.

[EpicCatman]

05:05 PM on 11/28/2010

Glad you mentioned that. It's a great read.