Europeans_Fear_Greek_Debt_Crisis_Will_Spread

Europeans_Fear_Greek_Debt_Crisis_Will_Spread - Europeans...

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Europeans Fear Greek Debt Crisis Will Spread By LANDON THOMAS Jr. Published: April 28, 2010 As Greece inches closer to the brink of financial collapse, fear that the debt crisis will spread is engulfing Europe. Increasingly, investors wonder if Portugal, Spain and even Ireland may not be able to borrow the billions of dollars they need to finance their government spending. “It’s like Lehman Brothers and Bear Stearns ,” said Philip Lane, a professor of international economics at Trinity College in Ireland, referring to the Wall Street failures that propelled the financial crisis of 2008. “It is not so much the fundamentals as it is the unwillingness of the market to fund you.” A major ratings agency cut Greece’s debt to junk level on Tuesday, warning that bondholders could face losses of up to 50 percent of their holdings in a restructuring. The agency also downgraded Portugal’s debt by two notches. Leading stock indexes across Europe plunged by 2.5 to 6 percent, and the euro fell to a recent low, for a 13 percent decline against the dollar since December. The Dow Jones industrial average slumped 213.04 points, to 10,991.99, a fall of 1.9 percent, and markets continued dropping into Wednesday, with Japan’s Nikkei index falling more than 2 percent. The downgrades, by , pushed up the interest rates that Portugal must pay on its 10-year bonds to a high, and Spain’s costs rose, too. Investors are already demanding nearly 10 percent in returns on Greek’s 10-year bonds. The cost of insuring all three countries’ debt against a default are also at record levels — a clear sign that investors are shunning them. “The situation is deteriorating rapidly, and it’s not clear who’s in a position to stop the Greeks from going into a default situation,” said Edward Yardeni , president of Yardeni Research. “That creates a spillover effect.” The problem is that it is not just Greece, which expects to receive international aid, but Portugal,
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This note was uploaded on 05/07/2011 for the course BUS 1302 taught by Professor Falcon during the Spring '11 term at University of Texas at Dallas, Richardson.

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Europeans_Fear_Greek_Debt_Crisis_Will_Spread - Europeans...

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