Ilyce Glink Show – Bailout of Greece and the Eurozone – October 30, 2011

Bailout of Greece and problems in the Eurozone continued this week. 

This week, the Dow was up 422 points, ending at 12,231 by the close of business on Friday. I can’t remember the last time we were over 12,000.

The reason for the sudden investor enthusiasm? Euphoria over the latest Eurozone deal. Leaders across Europe are in the midst of congratulating themselves for averting disaster. Nicholas Sarkozy of France intimated that if Greece had gone bankrupt, the entire Eurozone would have followed suit.

German Chancellor Angela Merkel is being praised for adopting a hard line with banks, insisting that major financial institutions take a 50 percent hit on their debt – or go down in flames. The banks blinked and the world markets cheered.

But here’s the problem as I see it: there are a number of problems in the Eurozone and I am concerned that none of these moves will actually solve the crisis. Make no mistake, Greece is still defaulting.

That nation must ratchet fiscal troubles down to a measure of 120 percent of its debt by 2020. Debt levels current reside at 170 percent. That is a mere eight years to produce serious results. A number of leading economists join me in my skepticism that that goal is achievable.

Other counties in the Eurozone are faring even worse. The euro region’s bailout fund now holds $1.2 trillion, and bond holders have taken a 50 percent write down. But is that enough to save an inevitable collapse?

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