Faber: Portugal Debt Default Would Kill Euro

[LaoPo]

Dr. Marc Faber: Portugal Debt Default Would Kill Euro

Wed, 20 Jan 2010 01:36 PM

By: Ellen Chang

Investors should expect to see more sovereign debt defaults, says Marc Faber, the editor of The Gloom Boom & Doom Report.

He said sovereign debt defaults occur after a financial crisis.

The countries to look out for now are Portugal, Ireland, Italy, Greece, and Spain.

Countries will have problems paying their debt, he told Yahoo Tech Ticker.

Portugal and other countries have a great likelihood of defaulting occurring even as soon as the next two years, he said.

Defaults from those countries could also kill the euro, Faber said.

Confidence in Greece is waning as its deficit rises and credit ratings are slashed, Reuters reported. Greek’s weak economy is affecting the euro.

“What is really crushing the euro is additional concern about the serviceability of the massive amount of debt rung up in Greece,” said Dan Cook, a senior market analyst at IG Markets in Chicago.

While that issue remains up in the air, “we will likely see a lot of selling pressure on the euro,” he said.

Last month, Moody’s Investors Service and two other major agencies decreased Greece's debt rating, Dow Jones reported.

Moody’s said that Portugal and Greece, which both have high levels of debt, could experience a “slow death” while much of the countries’ money is needed to pay back its debt.

Investor sentiment about the ability of Greece to repay its debt is waning.

“The central bank has clearly chosen to maintain its pressure on the Greek government, rather than easing the heightened tensions in bond markets,” said Laurent Bilke, a former ECB economist now at Nomura International PLC in London.

http://moneynews.com/StreetTalk/Faber-Port...01/20/id/347465

LaoPo

[BLUEEYEDTHAI]

The sky is falling,the sky is falling!

[flying]

The sky is falling,the sky is falling!

sky fell awhile back......

What folks now perceive as clouds & sunshine is smoke & mirrors

Take the time given to get some sunscreen cause its going to get hot

Edited January 21, 2010 by flying

[LaoPo]

Euro hits five-month dollar low

The euro has hit a five-month low against the dollar as continuing concerns about the Greek economy weigh heavily on the currency.

The European single currency touched $1.4127 at one point on Wednesday, before recovering slightly to $1.4135.

Although Greece has passed measures to reduce its budget deficit dramatically, some analysts believe the country's financial woes will persist.

Against the pound, the euro also fell, with a euro worth as little as 86.85p.

This was also its weakest position against sterling since August.

"Greece's debt problems look to be deep-rooted and they cannot be resolved immediately," said Takeshi Makita at the Japan Research Institute.

High debts

The euro rose steadily against the dollar for most of 2009, but recent falls will come as a welcome relief to European exporters.

A weaker euro means their products become cheaper for overseas customers.

Earlier this week, eurozone finance ministers said they welcomed the efforts being made by the Greek government to reduce the country's huge budget deficit.

Last week, the Greek parliament approved a three-year plan to cut the country's deficit from the current 12.7% of its annual gross domestic product (GDP) to 2.8%.

Greece also plans to reduce its debts, which amount to 113% of its GDP.

The Euro versus the Dollar - 2005 > early 2010

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/8469734.stm

LaoPo

[Trickcyclist]

Euro is too strong, even now, to get Europe going again. Another fall would be welcome.

[crusader79]

Faber's 2010 investment picks will be published by Barron's this weekend or next (probably next), part of the January investment Roundtable just completed.

Barron's twice-yearly investment Roundtables remain the best free source for his detailed picks, without subscribing to his newsletters.

[mommysboy]

I hope the Euro doesn't fall too much as the UK is in such a great position at present.

[haybilly]

I do wish you learned posters, whom I have come to trust implicitly over the years, would stop worrying me--I can't switch my portfolios much more, I'm running out of currencies to get rid of.

[LaoPo]

We knew it already but nevertheless....will the Euro union (finally) crash ?:

Roubini Never More Pessimistic on Euro Area, Calls Spain a Risk

January 26, 2010, 07:16 PM EST

By Simon Kennedy and Thomas R. Keene

Jan. 27 (Bloomberg) -- New York University Professor Nouriel Roubini said he’s never been more pessimistic about the future of European monetary union, saying Spain poses a looming threat to the euro region holding together.

“Down the line, not this year or two years from now, we could have a breakup of the monetary union,” Roubini said in a Bloomberg Radio interview from the World Economic Forum’s annual meeting in Davos, Switzerland. “It’s a rising risk.”

Roubini’s concern contrasts with the view of European Central Bank President Jean-Claude Trichet who said it’s “absurd” to imagine that the 16-nation euro area could splinter. Speculation of a breakup has mounted in financial markets as Greece struggles to cut the continent’s biggest budget deficit and countries from Spain to Ireland face rising debt burdens.

“The euro zone could drift essentially with a bifurcation, with a strong center and a weaker periphery and eventually some countries might exit the monetary union,” said Roubini, who predicted the recent financial crisis a year before it began. “This is the very first test” of the single currency bloc.

Economies including Spain and Greece are threatened by fiscal imbalances and declining competitiveness, Roubini said. Membership in the euro means they can no longer devalue the currency to export their way out of recession, he said.

Commission Deadline

The Greek budget deficit ran more than four times the European Union limit of 3 percent of gross domestic product last year and Greece is one of 13 nations facing deadlines from the European Commission to cut its shortfall. The country’s debt is set to top 120 percent of GDP this year, the highest in the euro region and twice the limit for adopting the single currency.

Trichet on Jan. 14 dismissed as an “absurd hypothesis” the argument that Greece could be forced to exit the euro area. The country should remain in the union where its problems “will be unequivocally easier to solve,” central bank governor George Provopoulos said in the Financial Times on Jan. 22.

Roubini said for all the focus on Greece, Spain may eventually pose a bigger threat to the euro zone because it’s the region’s fourth-largest economy and has higher unemployment and weaker banks. Spain’s jobless rate is more than 19 percent, almost twice the EU average.

“If Greece goes under that’s a problem for the euro zone,” he said. “If Spain goes under it’s a disaster.”

Bond Vigilantes

Roubini described rising sovereign risk as a “new phenomenon” for advanced economies that will complicate their recoveries from the worst global recession since World War II.

So-called bond vigilantes, or investors who punish governments by dumping their debt, “have been asleep at the wheel,” outside of Europe, Roubini said. The risk premium investors demand to buy 10-year Greek debt over comparable German bonds rose to an 11-year high of 312 basis points on Jan. 22.

“Eventually they could wake up” in Japan and the U.S. and sell off their bonds as they did with Greece.

“We have a massive fiscal problems in most of the advanced economies, and we’re not really dealing with it,” he said.

After Standard & Poor’s yesterday lowered its sovereign credit rating outlook on Japan, Roubini said he was “worried” about the world’s second-largest economy as its debt mounts, deflation returns and population ages. While it can currently finance itself thanks to domestic savers, at some point they may “flee the yen,” pushing up borrowing costs and crippling the economy, he said.

http://www.businessweek.com/news/2010-01-2...ain-a-risk.html

LaoPo

[Naam]

“We have a massive fiscal problems in most of the advanced economies, and we’re not really dealing with it,” he said.

Roubini said: "we have... and we are not..." does that mean even bigger arrogant àssholes than my [not so] humble self exist on this planet?

[alant]

is there no usa debt? if not where did all the money come from? i cant remember a year when the usa had a +ve BOP

[LaoPo]

Stocks fall on euro-zone worry

By Chuck Mikolajczak

NEW YORK (Reuters) - Stocks dropped on Friday, as worries about fiscal turmoil in Europe and a drop in technology stocks pushed the S&P 500 to its worst monthly decline since February 2009.

Uncertainty about the fiscal stability of Greece, Portugal and Spain caused U.S. investors to pull back from early gains, even as Greek and European Union officials said there was no chance of a Greek default or EU bailout.

More:

http://www.reuters.com/article/idUSTRE6030...;feedName=usdai

LaoPo