Where are the world financial markets heading for?

Sentiments have plunged the market again into a pit.Tumble is happening at Galatial speed,with out any remorse, and investors just don't want to risk there money with the market.

Since last couple of days investors have taken the money out of Indian stock markets plunging the Indian rupee 10% against the dollar.

Gold Prices have also come down, with people selling gold to lay their hands on cash.

Though ideally with the buying of long term treasury bonds, and and sell short-term bonds to help stimulate lending and growth.

The aversion to riskier assets helped prop up the dollar in foreign exchange markets.People are saying that companies and banks are in a good financial health, however it is the politicians who are making the mess out it, with inaction or no-action.
The Fed announced plans to try to push long-term interest rates down by purchasing $400 billion in long-term Treasury securities with proceeds from the sale of short-term government debt, saying the economy clearly needed help. By reducing the supply of long-term Treasuries, the Fed intends to force investors to accept lower rates of return on the ultra-safe securities, or to move their money into a wide range of riskier investments that could do more to promote growth.(NY times)

What Greece can do to avoid default

According to Wolfgang Schäuble, German finance minister, made it clear for Athens. “Membership in a monetary union is an opportunity, but also a heavy burden. Measures for alignment are very difficult. The Greeks must decide whether they want to bear this burden,”(FT.com)
With this kind of intense pressure being put on Greece,
it  is currently toying and trying to employ following methods to appease and meet the demands of EU,so that it get the much needed 8 billion euros, of funds by the first week of October,else it certainly will default, and the situation is so grim that they might not even be able to pay for the pension and salary of its employees after 10th of October.They just don't have enough funds available with them.

• Lay off, more than 10% of its work force.Greek govt employees, 1m, people out of a total population of 11Million.It needs to trim its work force.
• Greek govt, is planing to go for salary cuts,of its employees.
• Reduce the work of trade unions and device ways to collect more taxes, rather than rasie new ones.Infact, indirect taxes can certainly be raised.

BRICS meet in washington for Eurozone Crisis

We recently came to know that the meeting in Poland of 17 EU nations, has not yielded desired results.Germany and its friends are adamant on strong austerity measures to be implemented before funds are cleared.They were unhappy in which US tried to dictate them into managing the crisis, as United States itself suffers from huge debt and has certainly failed to curb it.

 Second round of bailout funds are still to be given to Greece as ,they wait for Greece to make structural changes in it system.
Against this backdrop we have another meeting, this time lined up in Washington,where leaders from Brazil,Russia,India,China and South Africa meet to find out ways to help Europe arrange  bailout funds for Portugal,Italy,Ireland,Greece & Spain.

Statistics for Comparison of Economic performance.

Since BRIC are part of G20, they feel its time they help their international counterparts.Apparently few Bric nations are sceptical as some hardly have any exposure in PIIGS,though they might just buy more European bonds.China is being looked upon,however it will certainly try to extract concessions for its help.We already are aware what Chinese are capable once they get the exposure and entry in any market!

Saving Euro.But How?

The Baton of saving Euro is certainly with world's third biggest economy.Germany holds the key to Europe.Though, it did let France take the political initiative, however the financial power is certainly with the country.
There is an opinion that by going for sharp budget cuts and tax rises,one is undermining growth.One can go slow and steady.If the small economies go into recession, it will only impact government debts.
One can clearly understand that Greece is insolvent, while Italy and Spain are Solvent, just that they are short of cash.

• Let Greece default.Debt restructing of Greece.(re-organize debt,where creditors do not face total loss, but will have to forego approx 20% of the total amt given to Greece.That way at least, they don't  face total loss.

• Full financial backing for countires like Italy,Spain,Portugal.

The problem with Greece is, it needs money to finance the basic functioning of its government.Europe, should create firewall around solvent governments.At no cost,they be allowed to default.At the moment though, Spain and Italy owe 2.5 trillion euros.

If the Break up EU happens, people reckon, it will be at the cost of 40-50% of GDP for small countries,while 20-25% for the core country.

Even if there is backing, for other countries, how can you let reckless governments of Italy and Portugal run away with the money of Germans?
Well, i think the initial idea of EURO was to provide an alternate currency to USD,for trade.And its failure is certainly going to have effects on countries like China,Iran etc.Therefore, it just might not fail.

Greek Default.Europe's Lehman?

People are still debating about the Greek default and have started to compare Greece with Lehman brothers,according to Greece, it appears that if Greece is let to default,it might just have a Chain reaction with Italy and Spain next in line.With Italy bloated budget, markets are having zero trust in the Italian political establishment.

In fact, with out the support of German finances, it will be difficult for Italy,Spain & France  to bailout  their banks.

Entire Europe is banking on Germany to help them over come this crisis.

With Germany insisting on austerity measures,the growth of the entire region is under threat.If Greece exits from EU,then it will certainly create quite a few legal issues.Would the companies be able to convert their contracts in devalued drachmas.

Rate at which markets are willing to lend to governments for 10 years:

· Germany: 1.74%

· France: 2.55%

· Spain: 5.36%

· Italy: 5.69%

· Ireland: 8.45%

· Portugal: 10.76%

· Greece: 21.25%
Source: Bloomberg. Data as of 13 September

Markets have been talking about Why lend to a country that could follow Greece's lead and default, or convert your euro cash into e.g. devalued liras.
If Greek Devalue, that way, it can still finance its govt, spending however, its imports cost and inflation will certainly go way up.Even if Greece stops paying its debt,its bank will still collapse.
Probably it is wise to stay together!

European banks debt crisis/Germany-France saviours

It's another crunch day for Europe, as the debt crisis that has engulfed the region for months intensifies.

Moody's slashed the credit ratings of two of France's biggest banks – Société Générale and Credit Agricole. amid fears that Greek default in eminent.Both have major holdings of Greek debt – leaving them vulnerable to a default.

The third Bank,BNP parbhaas, is planning to sell assets worth 70 billion euros, to muster capital reserves.

People are talking about common Euro bonds.

Italy, Europe's third biggest economy is also having trouble selling its bonds, its possible that it might default in 1.9trillion euros debt.It's parliament, with hundred's of parties has just approved an austerity package of 54billion euros.
Italian parliament votes for deficit-busting fiscal plan, despite protests

China has offered to help,having forex reserves of 3 trillion$, however they want more access to European market.BRICS too, is keen to help, and buy debt,(Italian) however, they too want to be sure where Europe is headed.

Spain has managed to sell, 3.95 billion euros worth of bond,today.

People have started to protest, and have been on the streets because of the austerity measures applied by various govts,Spanish govt, has cut the education budget by 2 b$, and has also asked the teachers to work 2 hrs extra, as there would be temporary freeze on hiring.

We have Germany and France trying to steer Europe and Euro Zone through this financial crisis.It is understood that Germany is having fearce opposition from its tax payers, who think that they are bailing out for the financial overruns of PIIGS.Infact,some they that Germany was always opposed to the entry of these weak economies in EU.

The friendship of France-Germany is also at stake which flourished after world war II,both of them have worked together.