Wednesday, October 27, 2010

Europe Financial Problems Escalate, Again, To Hit Euro Hard

As we suspected and wrote here, European woes are now hitting the news en masse, as the Euro was getting too high.

Greek 10-year yields surged 67 points to 10.26% (!), the biggest jump since the turmoil in June.

The Telegraph reports that a new budget deal in Portugal "has collapsed after marathon talks between the minority government of socialist premier Jose Socrates and conservative leaders ended in acrimony". Finance minister Fernando Texeira dos Santos said failure to agree on budget cuts will "plunge the country into a very deep financial crisis".

John Fitzgerald from Ireland’s Economic and Social Research Institute says "there is a risk that austerity tips the economy into a downward spiral, comparing it to an overdose of 'chemotherapy' that does more harm than good". Meanwhile Finance minister Brian Lenihan says the country has no choice:

"The cost of borrowing is high and rising, and if we do not act soon to live within our means, people may stop lending to us. We will not fool the markets for an instant if we seek to defer any longer what evidently needs to be done now. The Irish people will have to accept cuts in public expenditures and higher taxes,".

We are just missing Italy now.

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