Euro Zone Besieged by Problems

Reading from the news, it seems that every bit of it points to the looming demise of the Euro Zone. The bloc is not only dealing with the rising problems of Spain, but also with the economic troubles in Greece and Italy.

Problems seemingly pile up every week and those who have no hand in dealing with the debt crisis could only urge the EU leaders for swift and effective actions to prevent more financial troubles that would eventually lead to the collapse of the Euro area.

Just last week, it was reported that Italy’s public debt climbed to a record of 3 Billion Euros in May which is 17 Billion higher than the figure in April, according to the country’s central bank. Despite the measures taken by the government under Prime Minister Mario Monti, markets remained concerned. This manifested at yesterday’s bond auction where 10-year borrowing costs reached 6.37 percent.

In Greece, the troika officials are on their last stage of reviewing Greece’s compliance with the austerity programs which would qualify them for another tranche of the bailout fund. Speculations of a Greek exit from the Euro Zone have been fuelled by statements coming from Germany’s finance and economy ministers, as well as a report by Der Spiegel magazine which alleged that the International Monetary Fund (IMF) is hesitant to continue supplying funds for Athens. Greek Prime Minister Antonis Samaras is due to met with the troika officials on Friday.

In Spain, its request of a 100 Billion Euro-bank bailout has finally been approved by the EU, but its problems did not stop there. One of its regions, Valencia, has expressed that it would seek help from the government to pay its obligations, boosting speculations that the country would need a full-blown bailout. Another bad news, 10-year borrowing costs at yesterday’s auction further climbed above the unsustainable level of 7 percent, already reaching 7.46 percent. In addition, the Bank of Spain announced that the Spanish economy has been pushed deeper into recession in the second quarter of this year.

As to other Euro Zone member countries, Germany, the Netherlands and Luxembourg had their outlooks for their triple-A credit ratings lowered to negative by Moody’s Investors Service, citing “rising uncertainty” about the debt crisis.

Article by AlgosysFx Forex Trading Solutions