- Posted June 8, 2012 by
This iReport is part of an assignment:
Eye on Europe - June 8th
No matter whether in the Far East, down in Rio or on Wall Street all eyes continue to watch the unfolding day-by-day ups and downs in the Euro Zone. The US markets continue to react to every sneeze European banks or financial ministers make.
In early trading yesterday morning markets rose in optimism over Spain. But before the end of the day, remarks from US Federal Reserve Chairman Ben Bernancke put a damper on the world's economy.
Germany Tries to Power Through:
German Chancellor Angela Merkel has called for Europe to take a gradual path towards political union, frustrating the appeals of many of her colleagues for quick, bold moves to fight the continent's raging financial crisis.
After a meeting with British Prime Minister David Cameron, who called for "urgent action," Merkel noted Thursday that the debt crisis has built over the 10 years of the currency's existence and cannot be fixed overnight.
"Now it will also take a few years to get things right again," she said.
What’s to become of Europe? As Spain’s straits become newly dire and the whole euro zone convulses over its debt crisis, the common prayer is that Germany will rise up, reject outside help and protect the European household.
But Germany’s looking not so mighty itself: Industrial production in the once-indomitable economy is down. In April alone, it dropped by a stomach-churning 2.2 percent. "The German economy's immunity against the euro zone sovereign debt crisis is clearly fading away," Carsten Brzeski, an economist at ING in Brussels, warned recently.
Germany seems to have missed the memo that kicked off the digital economy decades ago.
The Rain in Spain:
Spain, a eurozone behemoth, is in the crosshairs of Europe's financial crisis. The country is suffering from soaring borrowing costs, a banking system leaking cash and unemployment rates at devastating levels.
Greece might be teetering toward expulsion from the eurozone but Spain's situation is now the focus of concern. If such a major economy were to fail, the repercussions could cause unprecedented havoc across Europe -- and the globe.
The bargaining has begun over a deal to rescue Spain’s ailing banks, confronting Europe with urgent choices about whether to try to enforce onerous bailout terms on Madrid as the crisis spreads to the region’s largest economies.
The question has seemingly become one of when, and not if, Spain’s banks will receive assistance from European countries, with investors on Wednesday predicting an imminent rescue and pushing up stocks and bonds on both sides of the Atlantic.
Spain, the euro zone’s fourth-largest economy, is too big to fail and possibly too big to steamroll, changing the balance of power in negotiations over a bailout.
Ode to a Grecian Urn:
Greece's unemployment shot up to 21.9 percent in March, rising sharply from the 15.7 percent rate in the same month last year and up from 21.4 percent in February, the country's statistics agency said Thursday.
Greece has been struggling through a financial crisis for the past two years, and has been relying on billions of euros in international rescue loans from other eurozone countries and the International Monetary Fund since May 2010. In return, it has made deep spending cuts and imposed major tax hikes, leaving the country mired in a deep recession.
The statistics agency said Thursday that unemployment was up 37.8 percent in March compared with the same month last year. Compared with February 2012, there were 21,625 more people unemployed this March, a 2.1 percent increase.
Young people have been the most affected by the job losses, with more than half _ 52.8 percent _ of those in the 15-24 age group out of work in March, compared to 42 percent in the same month last year.
Greece's financial crisis has also triggered political turmoil.
Asia Reacts Too:
Asian stock markets fell Friday, deflated after U.S. Federal Reserve Chairman Ben Bernanke gave no hint of immediate action to jump-start growth in the world's No. 1 economy.
Bernanke avoided sending any signals Thursday in an appearance before members of the U.S. Congress about what the Fed might do in response to a slowdown in hiring.
Francis Lun, managing director of Lyncean Holdings in Hong Kong said markets were "slightly disappointed" that Bernanke had not said the Fed would extend its Treasury bond-buying program, known as quantitative easing. The program injects money into the financial system, lowering interest rates to spur lending and growth.
Japan's Nikkei 225 index fell 2 percent to 8,471.04. South Korea's Kospi dropped 0.6 percent to 1,837.19. Australia's S&P/ASX 200 lost 1.1 percent to 4,062.90. Hong Kong's Hang Seng Index fell 0.4 percent to 18,604.18.
Benchmarks in Singapore, Taiwan, Indonesia, the Philippines and New Zealand also fell. Mainland Chinese shares moved higher by midday.
An effort by China on Thursday to reverse a sharp economic downturn by a surprise cut to the benchmark lending rates failed to rejuvenate markets because it may have been too little, Lun said.
"The economy is slowing much faster than people expected," he said.
From the Cornfield, like it or not, the US economy is tied in a knot from which it cannot easily loosen to the global economy.