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  • China: Save Europe From Default, But At A Cost

    The real problem is Italy, not Greece. Greece is a nano-state, representing 2 percent of the European Union’s gross domestic product. Italy is a G-7 country. Italy’s debt is 1.9 trillion euros, or 120 percent of its economy and greater than the debts of Spain, Portugal, Ireland and Greece combined. Italy’s bonds are trading at 4 percent more than those of Germany, unprecedented in the euro’s history and unsustainable. Italy is too big to fail but might also be too big to bail.

    The European crisis is no longer a European crisis. It has morphed into something that could easily engulf the global economy. Because of its size, because it involves governments and not just banks, and because it comes at a moment of great weakness, this crisis is more dangerous than the one posed by the collapse of Lehman Brothers, which filed for bankruptcy three years ago this week.

    The real problem is Italy, not Greece. Greece is a nano-state, representing 2 percent of the European Union’s gross domestic product. Italy is a G-7 country. Italy’s debt is 1.9 trillion euros, or 120 percent of its economy and greater than the debts of Spain, Portugal, Ireland and Greece combined. Italy’s bonds are trading at 4 percent more than those of Germany, unprecedented in the euro’s history and unsustainable. Italy is too big to fail but might also be too big to bail.

    Some have called for the creation of “euro bonds,” which would be a way for Germany to guarantee the debt of Italy, Spain, Greece and other troubled countries. On paper, it is an elegant solution. But it will never happen. Consider: The German people and government are adamantly opposed. Germany’s high court ruled that it is probably unconstitutional. The minute such bonds are floated, Italy, Greece and the others would lose all incentive to make painful reforms; they could borrow all the money they need at German-subsidized rates, so why go through the dreary work of restructuring? The Germans know this — hence their opposition.

    Read Full Article in Washington Post

    Good luck.

    Calvin Wilson
    Founder and CEO
    Upstart: Business and Management for 20-40 Year Old Professionals
    calvin.wilson1@verizon.net
    http://twitter.com/Upstart__Nation

    Filed Under: Global Business

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