The Fiscal Crisis: Greece is only the beginning

I have long said that this financial crisis is different than other recessions.  What we are witnessing is what someday could be called the Great Money Shift.  Greece, Portugal and Spain are not the only ones in trouble.

With Greece, debt is the immediate thing that is taking the country down.  But, Spain has a much lower debt burden (by about half) than does Greece and markets are betting against it in a big way.  With 20% unemployment though, and Spanish unemployment insurance dishing up 70% of maximum benefit status, costs are set to rise.   

This thing will end with some European countries defaulting on debt.  The US, UK and Japan will all lose AAA status on their debt.  They could all go much lower. 

 Some interesting thoughts from GARP on how the US will get sucked down the well.
Even under the rosiest scenario in which a rescue package comes through and the problem is contained, analysts say, European economic growth will slow as more countries feel pressure to raise taxes and take other tough measures to get their fiscal affairs in order.

"It'll take years of savage spending cuts, wage cuts and welfare-pension reform to eventually grow out of the debt situation," said Ruth Stroppiana, an economist in London for Moody's, which shaved its forecast for economic growth in the European Union this year to less than 1%.

That's not good news for American businesses, which count on Europe as a major market for a broad array of goods but already have felt the winds of an economic slowdown.

In the first two months of this year, U.S. companies exported $36.5 billion of products to EU nations, almost no change from the same period last year, even though American exports overall were up 17% in the same time frame.


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