Last week ended with the Dow closing 241.58 points down and falling below the 11,000 mark. Both global markets and Wall Street are likely to have their worst quarter in three years. Fears of Greece defaulting on its $485 billion of debt and of a global economic shutdown continue to fuel worries of a credit crisis similar to that in 2008 after the fall of Lehman Brothers.
It’s Sunday night — or more likely Monday morning as you’re reading this — and things aren’t looking too much rosier. Greece has already said that it will miss its budget deficit targets for 2011 and 2012: Its 2011 deficit is projected to be 8.5 percent. This is less than the 10.5 percent of 2010 but short of the 7.6 percent target that had been agreed with the European Union and the International Monetary Fund, in order for Greece to receive the next bailout installment of 8 billion euros ($10.9 billion) to avoid defaulting on its debts.
As eurozone finance ministers prepare to meet on Monday, there is a growing sense that Greece will default. The country’s economy is expected to contract by 5.5 percent this year and 2 percent next year. To qualify for the next tranche of the bailout, Greece has passed $8.8 billion in austerity measures and is preparing to lay off 30,000 public sector workers, most of whom are over 60 years old. The unpopularity of the measures, which follow previous rounds of salary and pension cuts and tax raises, is apparent as the country is hit by renewed waves of strikes (of most of the public transit system last week) and protests. Some Greeks have turned to bartering to get by on less and less.
Brian Beutler at Talking Points Memo says simply that “the European monetary union is on the verge of collapse.” Time is running out for eurozone finance ministers to figure out what to do not only to prevent a Greek default, but to staunch what has become a growing crisis in the EU, with repercussions for the the world economy. The 17 European Union nations have less than five weeks to show investors that they indeed have some plan to keep the eurozone together, before a November summit meeting of the Group of 20.
The euro has dropped to an eight-month low against the dollar prior to Monday’s crisis meeting of European country ministers. As of 9:13 a.m. in Tokyo, the euro has fallen to $1.3368 per dollar from $1.3387 in New York last week, after declining to $1.3322 — its weakest since January 18.
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