Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

New Cracks Appear in the Eurozone From Cyprus

Interest-Rates / Eurozone Debt Crisis Jan 24, 2013 - 10:20 AM GMT

By: InvestmentContrarian

Interest-Rates

Sasha Cekerevac writes: For the past few months, the eurozone financial crisis has significantly subsided, at least on the surface. However, because of the fragility within the eurozone, it won’t take much for a new financial crisis to be sparked.

There are new questions arising about the future of the eurozone, and these begin not with the giant nations of that union, but with tiny Cyprus.


Finance ministers from the eurozone countries are hotly debating much-needed bailout funds for the tiny island of Cyprus. One organization missing from these talks in Brussels is the International Monetary Fund (IMF).

As it stands, funds from the 700-billion-euro European Stability Mechanism (ESM) can only be dispersed if the IMF agrees to the cash payments. However, the IMF is disagreeing with some European nations as to the viability of Cyprus being able to pay back its debt under the current restructuring agreements. (Source: Pauly, C., et al., “Troika Travails: Split Emerges Over Cyprus Bailout Package,” Der Spiegel, January 21, 2013.)

Clearly, the financial crisis within the eurozone is not over if a nation like Cyprus is expected to have its debt load at 140% of its gross domestic product (GDP) by 2014—a clearly unsustainable level. This is the conclusion that the IMF has determined, and it is demanding that creditors of the banks within Cyprus incur a haircut in their principal or a decrease in their total claims.

Another serious worry for eurozone members is that Cyprus has a reputation of money laundering. With the financial crisis still a worry for many, especially the super-rich, having funds in accounts across the eurozone is clearly a problem. All citizens need to pay their fair share, and if one island nation is holding billions in assets hidden from the other eurozone members, this needs to be addressed.

While Cyprus is a tiny nation, this disagreement on how best to deal with the nation’s financial crisis is a great example of the inability of eurozone member nations and organizations to work together to come up with solid long-term solutions.

If the eurozone members in the IMF can’t agree on the bailout to avert a financial crisis in a small country like Cyprus, there’s not much hope or optimism for the much greater problems of their larger members.

While many investors have begun piling into eurozone investments, believing the worst of the financial crisis is over, this small split in views on how to handle Cyprus is indicative of possibly much larger problems to come.

The problem with so many eurozone members having interconnected ties across different countries is that it raises the issue of conflicts of interest. To avert a financial crisis, is it better to increase austerity at the price of local citizens while bailing out international investors? Or should creditors take some of the losses for their poor investments?

Similar questions continue to arise, and no end is in sight. The problem with the eurozone is that actions tend to only come because of a financial crisis. Very little progress is made when times are tranquil. But a financial crisis forces all eurozone members to focus on trying to solve some of the bigger problems.

The eurozone’s recent quiet environment is not due to the implementation of a long-term solution that will prevent any financial crisis down the road; it is simply buying time for member countries to enact the type of structural reforms necessary.

If the eurozone members do not take advantage of this lull in activity and simply waste time, the next financial crisis will be even worse.

Unfortunately, the only predictable outcome I can see for the future is that eurozone members will continue bickering.

Source: http://www.investmentcontrarians.com/debt-crisis/new-cracks-appear-in-the-eurozone-f...

By Sasha Cekerevac, BA
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

About Author: Sasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what to look for as an investor. His newsletters provide an experienced perspective on what the big funds are planning and how you can profit from it. He is the editor of several of Lombardi’s popular financial newsletters, including Payload Stocks and Pump & Dump Alert. See Sasha Cekerevac Article Archives

Copyright © 2013 Investment Contrarians - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Investment Contrarians Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in