Now the financial world faces the threat of a furious outbreak of the debt crisis in several European nations, starting with Greece, but closely followed by Spain and Italy.
The abrupt departure of more than 700 million euro of Greek banks in the environment causes the fear that the country's financial system will collapse, with unpredictable consequences for the moment not only for that nation, but also for others who follow in their footsteps.
Spain, in this context, manages to place debt every day, but at costs that are close to record highs. Something similar happens in Italy. In both cases, the recession and unemployment are too common words, and so far are not sustainable outputs to these problems.
This not only creates a climate of uncertainty, but also causes an ambiguous feeling. Germany and France, for now the two countries better off and maintainers of the eurozone, issue joint statements endorsing the continuation of Greece as a member of the same. However, these expressions may have other interpretations indoors.
The meeting with German Chancellor Merkel and the French leader Hollande was suggestive. There was so much urgency to go to Berlin, while the guests at the inauguration ceremony of Hollande were still in the rooms prepared for that purpose, to issue a statement in favor of Greece. If so, is that too complicated ahead.
And this seems so complicated and can take shape after the middle of the week. Greece has announced new elections, probably on June 17 (Greece is the cradle of democracy and cannot be programmed with a specific date for an election a month later), and the feeling prevailing in the southern nation is that they do accept European aid, but the austerity plan imposed in return.
The ambiguous feeling that we alluded to wonder just happens to be best for the eurozone. If you keep a country that has shown signs of failure in each of the commitments, or directly held her hand.
In the first case, the danger is that, before a collapse of its banks, other banks fall at the same time, and certainly much more important than bank premises. Spain and Italy should expect then a new opportunity to receive more aid, as if only there was a fire truck to three fires.
If Greece finally is out of the euro, as is thought to happen, the severity of the situation is the same, but with another approach. Discounting the country return to Hellenic drachma currency before the euro, but hyper devalued, which will generate inflation, economic chaos and an immediate isolation from the rest of the world, Europe will take charge of debt, which was signed, endorsed and implemented by the European Union, IMF, and private banks.
If this happens, the contagion effect on other banks will be instantaneous, and only the European Central Bank, through a monumental issue euro may bring some relief to the situation. The ECB appears today as the only entity with the key out of the crisis, although the high cost, similar to what the Fed did in the American banking crisis of 2008 and 2009.
Germany refuses, rightly, to take such actions. But with the new French government, and the pressure will in the near future, will have to give.
In any case, the euro would be affected negatively. About a month ago we said we did not see reason for the single currency as bullish behavior observed, being that half of Europe is in recession and a record unemployment.
An issue of euro can only generate its devaluation and a resurgence of inflation, which by now seems the lesser evil, if what is sought is that at least the next two years more nations do not follow the failed path of Greece.
In this context, every day becomes more blurred for Europe, the euro continues to perform multi-month lows, accompanied by the British pound, which had remained very strong in recent weeks. For the rest of the day, and even when we expect a recovery in both currencies, the euro has brackets 1.2630, where he spends a month uptrend line (derived from mid-2010), and 1.26, the pound has goals at 1.57, still far from the current 1.5830.
Weekly unemployment rate of the Philadelphia Fed planned for within a few minutes, pass almost unnoticed, to a market that has its eyes, minute by minute, the European crisis.