The future of the euro is grim because of default threat in Spain

Spain holds Eurozone in suspense

In brief: The exchange rate euro will depend directly on Spain, which can not solve its economic problems. The future of the euro remains uncertain.

The exchange rate depends not on the euro in Greece or Hungary, and from one of the countries – the founders of the euro area … The future of the euro looks unreal. Greece went into the background, now it is just “the opening act.” All eyes are on Spain, a country that is destined to have a significant impact on the future of the euro, as well as to determine whether a new system of management control over the budgets of the Eurozone countries. It will be a crisis in Spain – the situation will change for the better in the world.

That is why the key players of the world financial institutions gathered at the end of last week in Madrid. The situation in Spain is of great importance, because the economy of this country is the fourth largest economy in the euro area and exceeds the economy of Greece four times. According to economists, Goldman Sachs, if suddenly, Spain has suffered a financial fiasco, “the degree of widespread financial meltdown, for subjects with major Eurozone economies would increase by several times. The Bank of Spain has already separated from the capital markets and interbank lending. At the moment they are the largest customers European Central Bank. Last month, they took a loan 85.6 billion euros (105.9 billion dollars) from a lender of last resort, which exceeded the 74.6 billion euros, made in April. Spanish banks account for approximately 10% of euro area banking system, and they accounted for 16% net borrowing in the Eurozone. The next step – the use of 440 billion euros, provided by the European Foundation for financial stability. It was created by members of the euro-zone under the assistance program amounting to 750 billion euros, which is designed to reassure investors that no defaults will not be.

The need for urgent action to save the hotly deny all participants in this financial drama. The Delegation of the U.S. Treasury, as well as chairman of the IMF Managing Director Dominique Strauss-Kahn met in Madrid with Spanish Prime Minister Jose Luis Rodriguez Zapatero and other key officials of the Government of Spain in the supposedly normal, had long planned a meeting to discuss the prospects for growth over the next decade . President of the European Council of Herman Van Rompuy said “ordinariness” of the meeting, which was not discussed any emergency measures. Speculators and other market participants, who spread rumors that EFFS prepares life-saving assistance amounting to 250 billion euros, grow heated is not the case. Immediately after the meeting in Madrid, Dominique Strauss-Kahn said that he deeply believes in the bright future of the Spanish economy in the medium and long term, provided that all the measures to be taken will be taken. As a result, the reservation IMF chairman Jose Luis Rodriguez Zapatero had long afterwards deny that the crisis still exists, that he initially refused to reduce to reduce the size of the public sector, and some of the reforms proposed by Zapatero, was approved by Parliament with the advantage of one vote, as politicians were confident that the prospects for the Spanish beauty and joy of life is comparable only to that Tony Hayward (Note the head of the oil company BP). Investors are still skeptical and concerned that the award, which France will pay for German government bonds are considered safe (or at least safer than Spanish) increase rapidly after the Spanish put his hand in the treasury bond market and released in the summer of government bonds amounting to 50 billion euros. It is also important to note that, since the Spanish Government is unable to help national banks, the failure affected all of Europe, the USA and the UK. Miguel Angel Fernandez Ordones, chairman of the Bank of Spain, hoped that the financial turmoil will die down after the publication of test data on stress levels, which were some Spanish banks. According to him, these results show that national banks have enough opportunities to keep from defaults caused by excessive borrowing by the construction and real estate companies, as well as individual creditors under the mortgage. Investors failed to convince. First, the number of banks tested was very small, and secondly, the conditions for the test is hardly stressful.

According to new data from the Bank for International Settlements, Bank of Greece, Ireland, Portugal and Spain have 1.58 trillion dollars, of which 727 billion have only to banks in Spain. Arrears of German and French banks account for 61% of the total debt of the euro area and mostly accounted for by private borrowers. Thus, the mission EFFS – to remove tension from European banks. According to Cantor Fitzgerald, the assertion that the goal is to help EFFS eurozone countries, calculated that all citizens of Europe and the rest of the world – the naive fools. This was done to help the leading banks in Europe, which proved to be vulnerable to weak public debt. It is possible that the Chancellor of Germany did not prefer to save the Spanish banks, however, she realizes that the situation in Madrid may auknutsya in the future Berlin. She also understands that times have full sovereignty over the national budget for the euro area member countries far behind. Jean-Claude Juncker, head of the Eurogroup somewhat exaggerated the situation, saying that “too many countries of the 16 EU member states defend the interests of national economies. However, the national economy no longer exist. There is one economy, led by the single currency. There is good news. It was widely recognized that the situation in Spain did not get back to normal for as long as there will be no reform of the labor market. Already taken some steps in this direction. Firing workers is now at low cost, which in turn should encourage their employment. Meanwhile, it regretted Jose Luis Rodriguez Zapatero. The European Central Bank continues to convince him that the only sure path to economic growth – the introduction of austerity measures. President Obama will use the summit Big Twenty, to be held later this week to prove that the stimulus, rather than harsh measures, is the key to wealth. Nevertheless, the European Central Bank and its aid program – that at this point in greater need Zapatero, and not support Obama.

Anrey Torbinski
2010-06-21 21:30, Economics.

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