Thursday, September 29, 2011

The Euro zone cobbles together a 2 trillion Euro rescue package – Is this the ultimate panacea?

Editor’s Note: Please welcome our guest contributor here at The Mint, Mr. Jason Holmes.  Mr. Holmes is a regular contributer at Debt Consolidaton Care and various other financial websites and has authored several e-books.  Without further adeiu, Mr. Holmes:

Euro zone cobbles together a 2 trillion Euro rescue package – Is this the ultimate panacea?
As international pressure swells on Europe to forestall the Greek debt crisis from undermining the banks and economies around the world, the European leaders are busy cobbling together a rescue package that would quickly hit the economy with 2 trillion Euros of firepower.  According to the International Monetary Fund (IMF), the plans for an ambitious rescue package are coming together in order to enable banks to write-off a large potion (probably 50%) of Greek bonds. The latest talks about the launch of this particular package calmed down the European markets on September 26th, but there are still substantial doubts as to when this plan will be approved and in what form.
There is already doubt about the plan as without the support of the European Central Bank and the German parliament, which has already been hesitant in expanding its involvement, there is meager chance of the plans gaining approval. The larger bailout package has already run into opposition as the new President of the German central bank has suddenly emerged as a powerful critic of the entire rescue package. He has spoken against the expansion of the rescue mission by the ECB by purchasing the sovereign bonds of Greece, Italy and the remaining countries with spiraling sovereign debt crises.
Markets seize due to the Euro zone rescue package – Does this hold true?
As the rumors spread that the European leaders are planning a mammoth rescue package to avert the Euro zone debt crisis from wreaking havoc on the global economy, the US and the European markets have risen overnight.  The particular fund that is being provided for as part of the rescue package would be utilized when problem economies like Italy and Spain are in trouble. Though the European governments will take at least 5-6 weeks to put this entire plan in place, investors have collectively pinned their hopes on this impending rescue plan’s eventual passage.
Will the Euro zone rescue operation boost the FTSE?
The blue-chip shares of Britain were sharply higher across the board on Tuesday, 27th September and experts have also tracked gains on the Wall Street and in Asia. This was a result of the hope of the European leaders to take a purposeful action to assuage the debt problems within the region. While there were good recovery signs in commodity prices, energy stocks and miners spearheaded the entire rally. Though there was an alarm about the entire state of the global economy, this counteracted with the optimism of the euro zone debt situation. The US markets even felt a positive effect with the Standard & Poor’s 500 Index and the Dow Jones Industrial average ending at more than 2% higher on the 26th of September.
The effect of the EFSF – Is it going to fade out?
Though the officials in Brussels agreed to shore up the EFSF (European Financial Stability Facility) and provide Greece with some new and lucrative financing options, there are still too many questions that still remain unanswered. Will the rescue package, seen as a huge leap for the European politicians, be to small for the markets?  The Euro Stoxx 50 index, a yardstick of blue chips in almost 17 countries that share the Euro has been on a winning streak since the 18th of July, but it slipped to 0.11% on Tuesday. Both the Italian and the Spanish Treasury are paying more for funds and their debt auctions are meeting with weakened demand.
The Chairman of the Federal Reserve, Ben S. Bernanke is of the opinion that the Euro region’s $2 trillion rescue package is not the ultimate panacea as the measures are all “temporary”. According to Bernanke, without fundamental, long term changes in the economies of Greece, Spain, and Italy, it is unlikely that they will emerge from their grave financial situation.
Jason Holmes is a regular writer with and is also a contributor to other financial sites. His expertise is woven around various aspects of the debt industry and through his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like 'Credit Score The Quintessential Therapy for a Happy Pocket', ‘Take Creditors and Collection Agencies to Small Claims Court' and, ‘My Story- From Depression To a Smile'.