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.

PIIGS!

What is becoming of Europe.The recession fears along with years of extremely slow growth have crippled the economy of continent.Portugal,Italy,Greece & Spain are all in tremendous debt, and are finding it hard to pay for the borrowings, which they took from European central Bank.As we all know, major contribution for the ECB comes from Germany. Among st all gloom, it is only the Germans who have shown the capacity to withstand the recession and have in fact recorded a good growth rate.On the contrary these PIGS borrowed heavily and are now finding it hard to even pay the installments for the loans taken.One could see, how Greece was bailed out once again to avert a default in payment, which might have had a rippling effect on the banks of Europe and other nations who have exposure in Greece.Years of mindless spending along with fiscal mismanagement have contributed to this situation.There are talks for Greece to be asked to leave European Union as the German citizens are tired of bailing out the over spending Greeks from their hard earned and savings. In fact, some Greeks too want to move out of the union and EURO, as this will help them devalue their old currency and may be make some money via exports.
We just heard that Spanish parliament, has amended their constitution by putting limits on budget deficits and debts to a cetain level.This unprecedented step took place becasue of the collapse of the Spanish Bond market.


The changes will commit Spain to abide by European Union limits – currently 60 per cent of gross domestic

product for accumulated debt and 3 per cent of GDP for annual deficits – from 2020.

Sentiments and the World markets

Today again we hear the news of a rapid decline in the world share marketsFrom LSE to DAX,french,everywhere there has been a sharp decline.Apparently this rapid decline was accentuated by Taiwanese negative report on its own growth, ofcourse because of export reduction but also with  Morgan Stanley stating that the world economy is precariously close to world recession.Infact, there is lot of anxiety among investors and people in general.M & S comment came after two quarters of contraction in economies of United states & Europe.Morgan stanley has cut the growth forecast to 3.3%  approx from more than 4 % As we see, share markets are the barometers of the sentiments prevailing in the world finance.With investors selling stocks in hoards and running to either keep the money as liquid cash or probably still going for US treasury bonds,which is still considered the safest bet,even though the country has taken so much battering .Though it hard to imagine how a country which has world's most top 100 corporates headquarted, is facing the worst crisis of the century.According to some doomsayers all this happening because of the callousness of politicians across the globe.