Bankruptcy

1 Trillion Euro Bail Out

By mcbride

In a move described as a financial shock and awe bail out package, European governments together with assistance from the Federal Reserve announced a bail out for weak European governments of over 1 trillion Euros.  ?Stock futures skyrocketed Monday after European leaders agreed to a nearly $1 trillion rescue plan to avoid a major debt crisis and the U.S. Federal Reserve said it would also provide loans overseas.  Dow Jones industrial average futures rose 355 points.  [At the time of this article, the Dow is up over 400 points.]

The 16 countries that use the euro and the International Monetary Fund have agreed to create a nearly $1 trillion rescue fund to support European nations burdened by heavy debt. Markets around the world plummeted last week as fears escalated that Greece’s debt problems would spread throughout Europe and upend a global economic recovery.?

The size of the package, the speed with which it was put together reveals the true motivation behind this dramatic action: fear.  Clearly, there was fear that last week?s largest Dow drop ever was just one indication that the Greek debt crisis was not just the ?Greek? debt crisis but a world wide contraction, which could if not abated cause the value of the Euro to plunge further and drive credit markets to seize and become a world wide panic.  The package looks a lot like the bail outs which have propped up the US markets after the big drop in 2008.  However, as has been noted previously, this is likely to be a band aid, not a long term fix since it contains no debt reduction and since no extra income from these countries will be forthcoming, then, this can only post pone the inevitable while increasing governmental debt astronomically.  Here is a link: http://news.yahoo.com/s/ap/20100510/ap_on_bi_st_ma_re/us_wall_street

Michael

Full post as published by Texas Lawyer Blog on May 10, 2010 (boomark / email).