Wednesday, May 19, 2010

A Sound Plan Needed

Last week, I openly wondered if the 750 billion Euros war chest announced by Europe and the IMF would be enough to deal with Greece’s debt problems. After a week, the answer seems to be a ‘No’.

The Germans certainly seems to think so as Germany announced a ban on naked short-selling in various financial and bond markets. It’s a move designed to end fluctuations in the market ever since the Greece debt crisis engulfed Europe, but the need for the move also underscore the danger of the crisis.

Like I had said before, Greece is basically bankrupt and even with the war chest, there are questions on how Greece would be able to repay their debts. And that’s not even counting the troubles of Spain, Ireland, Portugal etc.

With the dangers, the German’s securities market regulator Bafin seems to have signal out short-sellers as the bogeyman of the crisis but that is an error. Until Greece comes out with a sound plan (that people believes in) on how to get itself out of the debt crisis, people are just not going to back the Euro.

If Greece can’t do that, then it might be better for the EU to let Greece default. Better that than the whole of the EU going down with them.

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