This weekend Greece holds a new election again.
Why all the fuss over a country with an economy not much bigger than Tasmania?
Because depending on who wins, it could lead to “Grexit”-which means Greece leaving the euro.
There is no precedent for a country leaving the euro so if it happens with Greece, we’re in uncharted territory and that’s what is worrying the financial markets
Then there’s another country to the European bailout list.
What about Spain?
Last week Spain requested up to $125 billion in bailout money to shore up its ailing banks.
Spain’s banks and the country’s economy are reeling from the bursting of a massive property bubble. Things are so bad in Spain that the country is back in recession and nearly 25 percent of the country’s workers are unemployed and it’s closer to 50% of the country’s under 25’s that are without a job.
Spain is the fourth largest economy in the euro zone and if it goes bust, it may create chaos in our financial markets but according to The Economist, if all goes according to plan, the new bailout money may be enough to reassure investors that Spain won’t go the way of Greece.
What about the USA?
Recently the Fed Chairman Ben Bernanke spoke last week and said, “The situation in Europe poses significant risks to the U.S. financial system and economy and must be monitored closely.”
He went on to say, “The Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”
While he didn’t announce another round of quantitative easing, the markets were somewhat reassured that he might pull the trigger if the economy gets much worse
And let’s not forget China.
They just announced a surprise interest rate cut which “raised concerns over the state of the economy,” according to MarketWatch on June 9, 2012.
We’re in for some interesting times ahead – the world’s economic woes won’t go away quickly. I will explain my thoughts on what the market turmoil will mean to our Australian property markets in my next newsletter out next Friday.
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