European Worries Weigh on Global Markets
22/04/10 22:08
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European Worries Weigh on Global Markets
Karl Schamota, Custom House Foreign Exchange - Calgary Office
Traders scurried for the exits this morning after numbers were released showing that Greece’s 2009 deficit was worse than the government had forecast. A shortfall totaling 13.6% of GDP was recorded, increasing the likelihood that the Greek government will trigger a bailout package from other European Union members. The Greek finance minister, George Papaconstantinou, told reporters that negotiations on a possible bailout would take at least two weeks to conclude. Greek bond yields have now hit pre-Euro highs, with investors expressing skepticism about the bailout. A restructuring of Greek obligations seems likely, which would hand significant losses to creditors.
European Worries Weigh on Global Markets
Karl Schamota, Custom House Foreign Exchange - Calgary Office
Traders scurried for the exits this morning after numbers were released showing that Greece’s 2009 deficit was worse than the government had forecast. A shortfall totaling 13.6% of GDP was recorded, increasing the likelihood that the Greek government will trigger a bailout package from other European Union members. The Greek finance minister, George Papaconstantinou, told reporters that negotiations on a possible bailout would take at least two weeks to conclude. Greek bond yields have now hit pre-Euro highs, with investors expressing skepticism about the bailout. A restructuring of Greek obligations seems likely, which would hand significant losses to creditors.
Greece’s difficulties are spilling over into other
Eurozone economies, with Portugal looking to be the
next major economy to fall into the debt abyss. Even
Germany, paragon of fiscal virtue though it is, has
been hit by the shift in investor sentiment.
Wednesday’s bund auction was undersubscribed, meaning
that government bonds went unsold at the offered
rates. This phenomenon underscores the risk that the
European Union faces: if leaders are not able to take
swift and effective action within a relatively short
time period, widening contagion could easily derail
the economic recovery and throw currency markets into
turmoil. Either way, the Euro’s short-term prospects
are not promising.