Sunday, June 10, 2012

When the Euro crisis will end?

Not a day goes by that something is written about the "Euro crisis" in newspapers. Now it seems that Spain is joining Portugal, Ireland and Greece to ask for some sort of emergency funding. There seems to be speculation about the amount of money needed between tens of billions and 100 billion euros. Anyway - lot's of money.

I have lost track of all the "facilities" through which funds are directed to the countries in need. Also, it seems that there is a dangerous pattern of declaring "emergency over" after "stress tests" or simply spending XX billions on the problem. The confidence isn't just quite restored yet. I have no idea when it will be and have come to a conclusion that probably nobody knows fully what is ahead of us.

Greece started the show in 2010 with getting emergency funding worth 45 billion euros in March and additional 110 billion in May. Ireland followed with 67,5 billion euros late 2010 and then Portugal got 78 billion euros in May 2011. Last summer Greece came once more back and total funding to that direction has ballooned to 285 billion euros. So there is already one example of a country coming back for more.

Thus, it's a bit hard to believe 100 billion is going to solve all of the problems in Spain - a much bigger country in terms of population and economy than Greece. The s**t will really hit the fan if Italy comes in and completes the pejorative acronym "PIIGS" used by many to reference these countries.

Our defensive posture with regards to portfolio allocation looks better every day.

Source for emergency loan figures and timing: Helsingin Sanomat 9th of June 2012