Eurozone Crisis - II

In my previous post on the topic, I had written about the impending fallout of Greece from the Eurozone and stated about the case of Spain and Portugal.  The latest update on that side is about the Bailout requirement in Spain that is expected to be anywhere between 50 Billion to 150 Billion Euro. However, the bailout package of Euro 19 Billion established by Spain in 2009 is just left with Euro 5 Billion and that means inadequacy of funds for Spain to bailout the Banking Sector that is reeling under crisis.

The Member nations of European Union (EU) are now pushing hard on Spain to come out clean on its Banking Bailout plan for the deficit between the requirement and the funds available with Spain.  As per the news prevailing, Germany has taken an aggressive stance towards the Bailout of Spanish Banking Sector and has been Pushing Spain hard to do so.  But the speculation lies in how Spain is going to achieve that when the country is already hit real bad by recession.

There were speculations around Spain having raised a request with IMF, but IMF spokesperson clarified that IMF has not received any such request from Spain and hence is not preparing any bailout package for Spain.

So the situation here is really uncertain with Greece, Portugal and Ireland already requesting for Financial Assistance and now Spain joining the fray where it is almost at the verge of raising the request for Financial Assistance.  

What would happen is full of uncertainty and that certainly would hit the World Financial Market real bad, unless the Weak European Union leadership comes together and works out a unanimous Work provision to deal with the Financial Crisis and Uncertainty prevailing in the Eurozone.  The world markets would keep tumbling the way they had been and the traders world over will have to keep a close eye on the Eurozone development to ensure that neither they nor their client suffer from the negative fallouts in Eurozone.

Till we hear a cheer from Eurozone, it would be a time to be cautious and it would be a tough time to deal with the Financial Turmoil, for us Indians Too....

Eurozone Crisis

Couple of years back, we the Indian IT professionals had been talking of the tough times as the US lead recession had hit the World Financial Markets.  We all thought that that were tough times, least we knew what the future has in store for us.  

Even today, we the Indians have been cribbing of the hike in Petrol Prices, Inflation Rate hovering around 7.23%, Cost of Living going higher with the increase in food price index and many other financial problems that are local to us and that certainly do not impact the Financial Stability of the Nation.  Just imagine a country that is Debt Ridden to the extent that it has been under recession for Five Consecutive years.  Think of Greece that has to cut across many of its Government Spending and lower Tax rates as the European Leaders wanted Greece to bring in reforms while they provide the help and support for the Country to come out of Debts and Recession.  But the latest round of talks have failed miserably with France and Germany having a difference of Opinion to the way the crisis needs to be dealt with.  

The reason the situation is called a crisis because if the European Leaders do not come to consensus on the way Greece needs to be brought out of its current Financial Turmoil, Greece is certain to quit the Euro.  In that case it is certain to bring down the World Financial System that as is is impacted with the uncertainty looming over the Euro.  The uncertainty whether Greece would continue with Euro or not? If European Council does not come out with liberal ways to deal with the Austerity in Greece, I am sure Greece would have no other option than floating its own currency and leave Euro.  Though OECD and other similar organizations have been trying to push for liberalization of stance for the way Austerity measures need to be taken by Greece. But the weak European Leadership and lack of common approach is pushing the world towards the fate of Crumbling Financial Markets.

Now if we are thinking that the impact of Greece's Fallout from Euro would be short lived, then I would like to draw the attention towards Portugal and Spain. Economy of these two nations is again debt ridden and if the Fate of Greece is to Float its own currency with little or inadequate support from other European Nations, I see a strong case of Spain and Portugal also quitting Euro.  That would mean a long and painful recession for the World Financial Market.  It would certainly hit the World Economy real bad with many smaller and weaker economies tumbling. 

And if that is not enough for the world economies to be cautious, even United Kingdom is said to be headed towards a state of recession and Bank of England is said to be preparing to infuse more money in the Financial System of UK to ensure that the recession does not worsen from its current state.

So, more than the worries of hike in Petrol prices, we need to look forward to ensure that the Indian Economy is not severely hit by the tumbling World Economy.  Though the Indian Economy is self reliant to sustain the recession the way it has done in past, but that doesn't mean that we wouldn't see the impact of Eurozone Crisis.  Its better to be ready for those rainy days than thinking of buying an umbrella 'If it Ever Rains'.