Monday, May 30, 2011

Euro fears the fear of contagion from the debt crisis

After stabilizing euro, the euro does not escape the fears in financial markets. Last week the European currency dropped below $ 1.40 in session, a level it had not reached the past two months, which could provide some contagion of debt.

It may be that the Euro has slipped because of the spectrum of contagion those folds once again on Europe. Until the debt crisis seemed confined to the three countries most vulnerable to the euro area, Greece, Ireland and Portugal, the euro seemed to regain its natural color.

For about two months, the euro had not reached such a level.
The slump in the currency of 1.59% to 1.3969 dollar is a sign that can be described as disturbing. The crisis of European sovereign debt threatens to turn into a crisis for the euro, says an economist at RBS.

However, political leaders want to dampen the atmosphere by ensuring that this phenomenon is a crisis affecting some countries of the monetary union but say, otherwise there are several reasons for thinking a resurgence effects contagion more brutal.

In terms of the following reasons, the market no longer believes that the tools established by the government to stop the debt crisis are sufficient, the restructuring of the Greek debt undermines the stability of other countries and political risk remains very high.

Despite this climate very offensive, the European commission recently  raised 4.75 billion Euros of bonds to 10 years and this, through the mechanism of financial stability (MESF) to fund aid to Ireland and Portugal.