Question by : Why sovereign debt crisis “weakens the euro”?
I read inside the financial information now which the much reported sovergein debt crisis (greece etc) has led with the euro weakening inside value over the course of the year however, no explanation was provided. Why is this?
Answer by simplicitus
People detest uncertainty:
So simply because of the brouhaha over Greece, plus with a lower extent Spain, Portugal, plus Ireland, folks are unsure regarding the Euro so the Euro is losing value relative with the dollar plus yen. This really is despite the truth which Greece is a rather little piece of the euro-zone economy
plus which the big ingredients of which economy, including Germany, are doing well.
Needless to say, it is actually potential which the difficulties with Greece have merely underlined the lengthy expression issues of the Euro plus which markets are reacting to this,
yet which is not probably – foreign exchange markets are notoriously short-term plus speculative instead of extended expression.
What do you think? Answer below!
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Image by CSIS: Center for Strategic & International Studies
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“Moretti Associates”: Taxpayers growing increasingly reluctant to bail out bondholders.
“Moretti Associates” have told clients that it is just “a matter of time” before sovereign debt bondholders suffer the consequences for the poor judgment they exercised before purchasing debt issued by several EU nations.
Mirek Nemacek, a senior VP at “Moretti Associates”, predicted that voters in European countries would “haul their leaders over the coals” if they continued to shield bondholders from losses by bailing out over-indebted EU member states.
“Most people understood the need for the bailout of the financial system considering the sheer pace at which it began unraveling but, 3 years on, voters in Germany, France, Holland and other northern European countries may force their governments to insist that investors holding the debt of defaulting nations accept their losses rather than effectively wrapping them in cotton wool”, said Mr.
“Moretti Associates” reminded clients that although it was essentially “right and fitting” that bondholders shoulder the costs of risks that made them a lot of money during the good times, the concept had to be taken in context since, if investors could no longer count on the “free ride” being provided by governments, they would undoubtedly demand higher yields when purchasing debt from EU countries. This would inevitably force interest rates up in the wider economy and stifle already anemic growth.
“People must be careful what they wish for”, said a “Moretti Associates” analyst.
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