The Eurozone Disaster Is Becoming A Farce!
Tuesday, June 26, 9:25 a.m. Global economies and markets are looking for a meaningful solution of the euro-zone crisis as their biggest hope for preventing a global recession. How realistic is that? Attempts to control or even end the crisis began two years ago with the first bailout of Greece in May, 2010. Bailout funds [...]

Tuesday, June 26, 9:25 a.m.

Global economies and markets are looking for a meaningful solution of the euro-zone crisis as their biggest hope for preventing a global recession.

How realistic is that?

Attempts to control or even end the crisis began two years ago with the first bailout of Greece in May, 2010. Bailout funds and so-called stability mechanisms were established that would supposedly ‘ring fence’ the rest of the eurozone and prevent the crisis from spreading.

Whoops. Didn’t work. Ireland’s crisis came to a head and required a $113 billion bailout just six months later in November, 2010.

But the EU, and particularly Germany and France, said “Ireland’s bailout will draw a line under the euro-zone’s debt crisis.”

Portugal was struggling with its debt load and budget deficits, but Germany and France expressed confidence that Portugal could correct its problems on its own and avoid needing outside help.

Nope. Six months later in May, 2011, as Portugal neared defaulting on its debt, the EU and IMF were forced to provide a $116 billion bailout. Like Ireland and Greece before it, in order to receive the funds Portugal had to agree to severe austerity measures to bring its deficits under control. They included public sector wage freezes, reductions in pensions, reductions in unemployment benefits, and increases in taxes, which would create a further drag on its economy and make it even more difficult to pull itself out of the mess.

That was to be the end of the crisis, but already there were signs that the previous bailout of Greece was unraveling, and that far from being ring-fenced, the spread of the crisis was accelerating, with Spain’s debt and banking crisis spiraling toward a need for bailout. That was scary as it was thought Spain would be too big to bail-out.

But no worry. Spain’s government insisted it had its situation under control and would not need a bailout.

Whoops. This year had arrived, and Greece could not meet its next debt payments. After much haggling it needed another bailout in February.

And there was Spain, in spite of its assurances, now standing on the edge of the same cliff, desperately asking that its banks be bailed out.

Spain received that bailout two weeks ago, only to have it become clear that Spain’s government debt crisis was even worse than its banking crisis. So it’s now desperately seeking the bailout that was deemed a year ago as too much for the rest of the euro-zone to handle.

Meanwhile, in Greece, the people rose up in protest over the tough austerity measures that had been imposed on it. The Greek prime minister was forced to resign. New elections were held last week, and a new government was formed. End of problems for Greece?

No. The EU is meeting this week. On its agenda is the possibility of softening the austerity requirements it is imposing on Greece for its second bailout. The new prime minister of Greece and his newly appointed Finance Minister were to attend, and present Greece’s requests.

But on Saturday it was announced that neither would be attending. The prime minister had undergone eye surgery, and his Finance Minister was “feeling nauseous”. And yesterday, the Finance Minister resigned, after only one week in office. It would be an unbelievable comedy if not for the hurt and damage the crisis is creating for Greece’s people and economy.

And now this morning, Cyprus has become the next in line to seek a bailout from its crisis.

A total of five euro-zone nations are now in bailout mode (Greece twice). That is 30% of the 17 countries in the euro-zone, with concerns now growing regarding Italy.

And the world is looking to this week’s EU meeting to end the crisis?

Good luck with that hope.

The only potential positive is that there is so little confidence that the EU meeting will produce anything massive enough to resolve the crisis, that any action at all may be taken as a positive surprise.

Subscribers to Street Smart Report: There is an in-depth ‘Global Markets’ signals report in the subscribers’ area of the Street Smart Report website from last night. And the next issue of the newsletter will be out tomorrow.

To read my weekend newspaper column ‘Major Market Hopes Were Dashed – What Now?’ click here.

Yesterday in the U.S. Market.

A down day, but not as negative as European markets.

The Dow closed down 138 points, or 1.1%. The S&P 500 closed down 1.6%. The NYSE Composite closed down 1.6%. The Nasdaq closed down 2.0%. The Nasdaq 100 closed down 2.0%. The Russell 2000 closed down 1.7%. The DJ Transportation Avg. closed down 1.9%. The DJ Utilities Avg closed down 0.4%.

Gold closed up $18 an ounce at $1,588.

Oil closed down $.56 a barrel at $79.20.

The U.S. dollar etf UUP closed up 0.3%.

The U.S. Treasury bond etf TLT closed up 1.5%.

Yesterday in European Markets.

European markets were down again yesterday. The London FTSE closed down 1.1%. The German DAX closed down 2.1%. And France’s CAC closed down 2.2%.

Asian Markets closed down Sunday night but mixed last night.

The Asia Dow closed down 0.8% Sunday night, but down only 0.1% last night.

Among individual markets last night:

Australia closed down 0.4%. China closed down 0.1%. Hong Kong closed up 0.5%. India closed up 0.1%. Indonesia closed up 0.6%. Japan closed down 0.8%. Malaysia closed down 0.5%. New Zealand closed down 0.5%. South Korea closed down 0.4%. Singapore closed down 0.3%. Taiwan closed down 0.4%. Thailand closed up 0.3%.

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Markets This Morning:

European markets are mixed this morning. The London FTSE is up 0.2%. The German DAX is down 0.1%. France’s CAC is down 0.1%.

Oil is up $.06 a barrel at $79.26

Gold is down $11 an ounce at $1,577 an ounce.

This Morning in the U.S. Market:

After two quite light weeks, this week returns to being a heavy week for potential market-moving economic reports, including another revision of 1st quarter GDP, New Home Sales, Consumer Confidence, Durable Goods Orders, Chicago PMI, etc. To see the full list and times for each release click here, and look at the left side of the page it takes you to.

Yesterday’s reports were that the Chicago Fed’s National Business Index fell to –0.45 in May from +0.08 in April. And the 3-month m.a. fell to -0.34 from –0.13 in April, still short of the 0.7% that indicates the economy is in a recession. But New home sales were up 7.6% in May. And the Dallas Fed Mfg Index jumped to 15.5 in June from 5.5 in May, while the outlook for future expectations fell from 4.3 in May to 1.3 in June.

This morning it was that Housing Price Index showed home prices rose 1.3% in April. Still to come are Consumer Confidence, and the Richmond Fed Index, both of which will be released at 10 a.m.

Our pre-open indicators have been somewhat positive all night and into this morning.

Our Pre-Open Indicators:

Our pre-open indicators are pointing to the Dow being up 30 points or so in the early going.

To read my weekend newspaper column ‘Major Market Hopes Were Dashed – What Now?’ click here.

Subscribers to Street Smart Report: There is an in-depth ‘Global Markets’ signals report in the subscribers’ area of the Street Smart Report website from last night. And the next issue of the newsletter will be out tomorrow.

I’ll be back with the next regular blog post on Thursday morning at 9:25 a.m.

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