Eurozone Crisis: Key Questions
London, UK - 29th April 2010, 10:00 GMT
Dear ATCA Open & Philanthropia Friends
[Please note that the views presented by individual contributors are not necessarily representative of the views of ATCA, which is neutral. ATCA conducts collective Socratic dialogue on global opportunities and threats.]
Since we have already written extensively about the developing eurozone crisis over a long period, on this occasion, we will simply ask some key questions we are asking ourselves:
. Is the sovereign debt crisis in the eurozone becoming similar to the Lehman Brothers crisis in September 2008?
. What are the consequences of contagion from the Greek debt crisis, given that Spain has become the third country in Europe to have its credit rating downgraded recently, post Portugal and Greece?
. Given the large exposure of European financial institutions to sovereign debt and private-sector assets including equities and corporate bonds in Greece, Portugal and Spain, what is the possibility of the eurozone sovereign debt crisis becoming a banking crisis, as all asset classes in those countries continue to falter?
. Is any aid package for Greece now going to come in too late? Had the help arrived a few months ago, would it have prevented the situation from deteriorating further not only in Greece but in other countries such as Portugal and Spain?
. As Greece waits for eurozone members to disperse funds, do the EU and ECB have concrete plans to help other member nations, such as Portugal and Spain, should aid be needed?
Too Big To Bail-out
. Spain's economy -- 4th largest in the eurozone -- is much bigger than Portugal's and Greece's. Is Spain too big for a bail-out should it need one?
End of Credit Bubble
. What are the growth and stability prospects for the PIIGS -- Portugal, Ireland, Italy, Greece and Spain -- given the collapse of their credit-fuelled housing and construction bubble(s) followed by the need for massive deleveraging?
Devaluation or Deflation
. If devaluation is not an option for the weaker eurozone countries, how tenable is a model of continuous debt and deleveraging induced deflation with unpalatable social consequences?
. Since Greek sovereign debt has been downgraded to junk status and Greek bond yields have risen to unprecedented double digits, is restructuring of Greek debt, ie, some type of default imminent?
. How will Greek sovereign debt be used as collateral to access ECB funds, now that it is below the threshold of acceptability?
. What are the precise details of the rescue package for Greece and mechanisms for transfer of funds from euro-member countries to each other?
Joint Payment Liability
. Even if Germany accelerates negotiations with the IMF and Greece, will weaker members within the eurozone such as the PIIGS be able to pay their expected dues to rescue Greece in the collective range of euro 120bn to 135bn?
. If Greece does not have a viable plan to retire debt in the coming years, is it appropriate for Germany and other eurozone countries to support the bail-out of Greece? Will their parliaments go along with such a bail-out?
Future of Euro and Global Recovery
. What are the consequences of the spiralling Greek debt crisis and credit rating cuts of some eurozone members for the future of the euro and the global recovery post The Great Unwind and The Great Reset?
. Is the sovereign debt bubble a ticking time bomb not just for the PIIGS in the eurozone but also for other profligate economies amongst the elite nations?
. Are we heading for the second correction of the financial markets similar to 1932 post 1929?
We have been watching the changing situation within the eurozone by the month, by the day and now by the hour. If you have the answers to the key questions, we have posed, we are keen to hear from you.
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