The End of the Euro

According to some, the euro could come to an end soon:

Richard Howard, a managing director for global markets at Dallas-based Hayman, said Germany may opt to shore up its own economy, Europe’s biggest, rather than bail out fellow euro nations such as Austria, Italy and Spain as their banks sag under the weight of bad debts. That might lead to defaults and compel Germany to renounce the euro, he said.
“People said subprime could never blow up but it did and now they’re saying the exact same thing about the eurozone,” said Howard. “There’s no stopping what is now a downward spiral.” He declined to discuss his investments.
Hayman joins a growing number of investors seeing the possibility of a breakup of the $12 trillion euro bloc, conceived more than 10 years ago to cut unemployment, tame inflation and create a rival to the dollar. Societe Generale SA said this week Germany may refuse a bailout in an election year. ABN Amro Holding NV said Feb. 17 the crisis is “Europe’s subprime.”
Euro-region bank loans to Eastern Europe topped $1.3 trillion in the third quarter last year, or about 9 percent of the bloc’s gross domestic product, ING Groep NV said Feb. 18, citing Bank for International Settlements data. Now lenders face losses after extending credit to finance everything from industrial development to domestic real estate.
Irish banks took on debt equivalent to 11 times the nation’s own gross domestic product, Dutch-bank credit reached seven times GDP and Belgium four times, according to BNP Paribas SA.

Posted by on February 27th, 2009 at 12:41 pm

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