Home » Economy, Europe, Financial Crisis » Greece euro exit to hit Spain and Italy hardest


Greece euro exit to hit Spain and Italy hardest

 
 
 
 
 
submit to reddit

Where the eurozone crisis heads will depend not on whether Greece leaves the union, but on how the situation in the region affects debt-troubled Italy and Spain, Aleksey Bachurin, head of Russian Cash Equity Trading at Renaissance Capital, told RT.

­“The important thing is not Greece itself: it’s relatively small and the investments in Greece are already written down by most banks. But the potential contagious effect on Italy and especially Spain – this is a real danger,” Bachurin said.

Indeed, as the Greek crisis entered a new phase with the country’s party leaders failing to form a government, Italian and Spanish borrowing costs surged and banking declined.

Late on Monday, Moody’s rating agency downgraded the debt rating of 26 Italian banks, including giants UniCredit and Intesa Sanpaolo. Ten of them were lowered to so-called junk status, while some saw their ratings cut by as much as four notches. Meanwhile, Spain announced a consolidation of four major banks aimed at creating a lender with assets of 270 billion euro.

Though some European politicians insist the eurozone would survive even without Greece, some economists say it might be the end of the game. The deterioration in Greece could result in “huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany,” Paul Krugman, renowned US economist, wrote in his column in the New York Times.

In this case Germany would be left with two options, according to Krugman. The first would be to “accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy.”

“To give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down, and a higher eurozone inflation target to make relative price adjustment possible,” the expert says.

The second would be – to give up the euro.

Meanwhile not everyone is so pessimistic on the euro’s future. Banks across Europe are already preparing for the possibility of Greece’s exit, discussing probable legal and practical problems with a possible return of the drachma, but a total return to national currencies is not, it seems, on the agenda.

Source

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  


RELATED ARTICLES

Did you like this information? Then please consider making a donation or subscribing to our Newsletter.
  • TRACER

    The best thing what Greece can do is leave EU, it is a money trap which Greece has fallen in.
    Bailout is only for the banks and not for the Greek small industry or population. Bailout helps only miss management of the banks CEO’s. Since S&P is supported by the banks and insurance companies there for Greeks rating can go up and down according to the wish. There are no parameters for the rating setup. Greece has so much oil and gas which will be later taken away for free because the multinational companies will buy privatize state owned object or property very cheep for example Air Port, Sea Port, and railway, Post and so on. A country in general can not get bankrupt. The local tax payers will suffer for the entire miss happening.
    Disagree champions should prove other wise. I have worked in and with bad banks right on the source and have good inside knowledge how things work.

    VA:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
  • TRACER

    After all that bank bailouts and Fend brief from Germany. Germany will never get the money back. One does not have to be an expert or German finance minister.
    TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) will walk in. That is as I understand all the German citizen will be pushed into compulsory credit that could be 10% to 20% of the real estate value whether one likes it or not, afford it or not to support and finance the country over spending. I hope and wish it’s all not true ????????? . A normal citizen of EU has no idea what is written in the EU policy which The government has agreed to.

    VA:F [1.9.22_1171]
    Rating: 0 (from 0 votes)
Copyright © 2009 The European Union Times – Breaking News, Latest News. All rights reserved.