‘The recent elections in France and in Greece have thrown the global
financial system into an uproar. Fear and worry are everywhere and nobody
is quite sure what is going to happen next. All of the financial deals
has made over the past few years may be null and void. Nobody is going to
know for sure until a new government is formed, and at this point it looks like
that is not going to happen and that there will need to be new elections in
June. All of the financial deals that France has made over the past few
years may be null and void as well. New French President Francois Hollande seems determined to take France on a
path away from austerity. But can France really afford to keep
spending money that it does not have? France has already lost its AAA
credit rating and French bond yields have started to move up toward dangerous
territory. And Greek politicians are delusional if they think they have
any other choice other than austerity. Without European bailout money
(which they won't get if they don't honor their current agreements), nobody is going
to want to lend Greece
all of this talk about "austerity" is kind of silly anyway. It
isn't as if either France or
was going to have a balanced budget any time soon. Both nations were
still running up huge amounts of debt even under the "austerity"
the citizens of both nations have sent a clear message that they are not going
to tolerate even a slowdown in government spending. They want to go back
to the debt-fueled prosperity of the last several decades, even if it makes
their long-term financial problems a lot worse.
as I mentioned earlier, Greece
does not have that option. Without the bailout money that they are
scheduled to get, Greece
does not have a prayer of avoiding a disorderly default. Private
investors would have to be insane to lend Greece money if the bailout deal
falls apart. Greece desperately needs the help of the EU, the ECB and the
IMF and the only way they are going to get it is if they abide by the terms of
the agreements that have already been reached.
only way that Greece
can avoid austerity at this point would be to leave the euro. Nobody
would want to lend money to Greece
under that scenario either, but Greece
could choose to print huge amounts of their own national currency if they
situation is different in France.
Investors are still willing to lend to France
at reasonable interest rates, but if France
chooses to run up huge amounts of additional debt at some point they will end
up just like Greece.
is even more important in the short-term is the crumbling of the French/German alliance on
European fiscal matters. Angela Merkel and Nicolas Sarkozy
were a united front, but now Merkel and Hollande are
likely to have conflict after conflict.
of moving in one clear direction, the eurozone is now
fractured and tensions are rising.
what comes next?
investors are not certain what comes next and that has
many of them deeply concerned.
following are 11 quotes that show how worried the financial world is about Europe right now....
#1 Tres Knippa of Kenai Capital
Management: "What is going on in Europe
is an absolute disaster…the risk-on trade is not the place to be. I want to be
out of equities and very, very defensive because the situation in Europe just got worse after those elections."
McCormick, currency strategist at Brown Brothers Harriman: "We’re
going to have higher tensions, more uncertainty and most likely a weaker
#3 Nick Stamenkovic,
investment strategist at RIA Capital Markets in Edinburgh:
"Investors are questioning whether Greece will be a part of the single
currency at the end of this year."
#4 Jörg Asmussen, a European Central Bank executive board
needs to be aware that there is no alternative to the agreed reform program if
it wants to remain a member of the eurozone"
#5 Tristan Cooper, sovereign debt
analyst at Fidelity Worldwide Investment: "A Greek eurozone
exit is on the cards although the probability and timing of such an event is
#6 Art Cashin:
"Here’s the outlook on Greece
from Wall Street watering holes. If a coalition government is formed or looks
to be formed, global markets may rally. Any coalition is unlikely to make
progress on goals, since austerity is political suicide. There will likely be
another election around June 10/17. A workable majority/plurality remains
unlikely, so back to square one. Therefore, Greece will be unable to attain
goals by the deadline (June 30). Lacking aid funds, pensions are suspended and
government workers are laid off. Protestors take to the streets and government
is forced to revert to drachma to avoid social chaos. Pass the peanuts,
Noonan, Senior Forex Analyst with Thomson Reuters
"Sentiment is very bearish, The euro is under a
lot of pressure right now. I get the feeling that it’s going to be a nasty move
lower for the euro finally"
#8 Kenneth S. Rogoff,
a professor of economics at Harvard: "A Greek exit would underscore that
there’s no realistic long-term plan for Europe,
and it would lead to a chaotic endgame for the rest of the euro zone."
#9 Chris Tinker of Libra Investment Services: "It’s a
binary decision. If Greece
gets itself to the point where the European administration says, ‘We can’t play
this game anymore,’ that starts a domino effect"
#10 Nicolas Véron,
a senior fellow at Bruegel: "France has very
limited fiscal space and actually has to engage in fiscal consolidation"
80-year-old Greek citizen Panagiota Makri: "I'm confused. I feel numb and confused.
Only God can save us now"
of this comes at a time when much of Europe is
already descending into a new recession. Economies all over Europe are contracting and unemployment rates are
skyrocketing. Until things start improving, there is going to continue to
be a lot of civil unrest across Europe.
things are not so great in the United
Chase CEO Jamie Dimon claims that the U.S. economy is
holding a "royal straight flush",
but the only part of that he got right was the "flush" part.
are 100 million working age Americans that do not have
jobs, the middle class continues to shrink, the rising cost of
food and the rising cost of gas are severely stretching the budgets of millions
of American families and the federal government continues to run up gigantic amounts of debt.
Europe descends into financial chaos, the United States is not going to
escape it. The financial crisis of 2008 deeply affected the entire globe,
and so will the next great financial crisis.
us hope that we still have a little bit more time before the next great
financial crisis strikes, but things in Europe
are rapidly unraveling and at some point the dominoes are going to begin to