Euro Zone Crisis: The Can Stops Here

The euro fell to its lowest ($1.216) in more than two years after European policy makers unanimously approved a €100 billion ($122 billion) bailout of Spanish banks.

It was the equivalent of a vote of no confidence about the bailout bid. Said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London, in Bloomberg:

“We’re looking at a situation when people are realizing we’re at a point of debt restructuring and repudiation. It’s cold-hearted reality. The great blag and bluff of the euro zone has always managed to kick the can down the road, but it is no longer a viable strategy. We’re getting to a crunch point.”

Officials are still in dispute about who will assume the burden of the emergency loans, the banks or the Spanish government.

Spanish Prime Minister is predicting a second year of recession for Spain. Civil servants have been peacefully protesting in Madrid but things turned violent on Thursday night and police fired rubber bullets. The state of Valencia is seeking a rescue from the central government.; it is the first to do so.

Spain now finds itself paying record-high costs to borrow.

It is almost exactly a year since European leaders pledged to give Greece, where the debt crisis originated in 2009, a second bailout. An ally of German Chancellor Angela Merkel went so far as to endorse the possibility of Greece leaving the euro zone.

Greece must make a €3.1 billion bond payment mostly to the European Central Bank (ECB), which has said that Greek bonds are ineligible as collateral, the first “tangible message” that Greece has “no more room to maneuver and that the bailout agreement must be implemented.” The troika of the European Commission, the International Monetary Fund (IMF) and the European Commission return to Athens next week to see if it is meeting its targets for making cuts to meet the terms of its bailout agreement.

In addition, tourism is down in Greece, with ferries carrying 15% fewer passengers and 25% fewer vehicles than by the same point in 2011. The wildfires have meant the evacuation of a children’s summer camp, a retirement home and a monastery near Athens.

Related Care2 Coverage

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Photo by pfarrell95

Disclaimer: The views expressed above are solely those of the author and may not reflect those of
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Christina C.

12:39PM PDT on Jul 23, 2012

Has anyone here read the book Ishmael? The world as we know it is going to come crashing down. We can see that it is happening but we think all we have to do is more of what we are doing in order to stop it from happening. They say that insanity is when you do the same thing over and over again expecting a different result. What we need to do is admit we were wrong from the get go and change to something that actually works.

July 23
send a green star

12:22PM PDT on Jul 23, 2012

Has anyone here read Ishmael? The entire world is going to crash and we are all just watching it happen. We think that if we just keep doing what we are doing but more of it then we will be fine. All we have to do is admit that we were wrong to live like we do in the first place and change to something that works better.

Ernie M.

7:50AM PDT on Jul 23, 2012

Just a case of greedy banks taking advantage of people and governments.

Christine C.

4:01AM PDT on Jul 23, 2012

Thanks

Toby S.

3:01PM PDT on Jul 22, 2012

JLA there is no way to get the banks to change and "take responsibility", They won't and the politicians will not, unless the people absolutely force them to and that will be delayed, reduced and largely nothing but propaganda. We must have a real solution.

The FED debt currency is worse than you say Christina C, we actually have more total public and private debt than money has EVER been created. If every dollar in the US money supply is applied to the total debt...it won't pay it off. We now owe more money than exists.

Knut you have the blame wrong. You are making a symptom into a cause. Over-leveraging of borrowers did not cause what you say it did, it is the result of a bank policy to expand the borrowed money using lowered reserve requirements. They wanted people to borrow money and made loans that were clearly not proper Back some time ago, to lend a dollar, the bank had to have a dollar. Then by a change of the "reserve requirement", if the bank had a dollar it could lend 10. It reached 2%, perhaps even less. So if the bank has $2, it can lend 98$ and charge interest on $100, 98 of which it made "from thin air". People figgured out that those levels are very risky and the "bank bailout"/"quantitative easing" helped to re-capitalize them to, I'm guessing around 5%.

July 22
send a green star

Carole H.

8:25PM PDT on Jul 21, 2012

thank you Victoria S. for your comment and your thanks - could I just say I am Carole with an e - I only mention it as there is, or there was another Carol(e) H. without the e and I would not like to be confused with others - thank you. Small point I know.

July 21
send a green star

Victoria S.

5:58PM PDT on Jul 21, 2012

Have you ever had a gambler in your family? I have. They will spend every last penny on a horse race thinking they will win big, but Never do! All the Banks around the world are now Gamblers in the 'family', given power by the governments by removing, loosening and changing laws and regulations. They tell everyone that these banks will monitor themselves! Well we all know how that worked out! Don't we?
Thank you, Thomas S, Toby L and Carol H for the truth.

Yvette S.

5:51PM PDT on Jul 21, 2012

Thanks for posting

Marilyn L.

2:25PM PDT on Jul 21, 2012

Interesting Thanks