Europe’s 3 choices

In the analysis of Europe’s debt mess and what can be done, they have 3 choices. Firstly and likely the last option they will utilize is debt restructuring (the most painful short term but best solution long term), the 2nd is ECB money printing that would be used to pressure bond yields lower to buy more time and lastly, Germany and the other highly rated countries decide to further socialize the regions debts or at least pony up more money. On the 3rd option, Moody’s last night put Germany, the Netherlands and Luxembourg on notice that the more they extend themselves for the sake of the region, the obvious negative implications for their credit metrics. Out of door #2 is likely what comes next from the region. With Greece and the meetings this week, the PM said their challenge is “herculean” but “we can show that Greeks can rise to the occasion and surprise them all.” The euro zone July mfr’g and services composite index remained below 50 for a 6th month at 46.4 but was in line with estimates and unchanged with June. French business confidence fell to the lowest since Feb ’10. In China, their recent attempts to goose their economy lifted the flash HSBC mfr’g index to 49.5 from 48.2, below 50 for a 9th straight month but the best in 5 months. The Shanghai lifted a touch off its lowest level since Mar ’09 in response.

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