Europe’s Indebted Escape Plan
The health crisis is ending; the debt crisis is starting. If it wasn’t for rock-bottom interest rates and loose government lending, we’d be rubbing sticks together for warmth. It was every European nation for itself as soon as the virus hit, and abundant bailouts began.
The panic is over now, so European nations are back into the spirit of their Union. 27 EU member states sat round a table this weekend for critical talks. The stakes could not be higher, as each nation takes part in negotiations to share each other’s debt.
It was the two wealthiest and most powerful members of the group, France and Germany, Macron and Merkel, forcing equal share of a $750 billion deal down the poorest members’ throats, also worst hit by the virus. The deal proposed free grants to those countries, but the so-called “Frugal Four” of the Netherlands, Denmark, Sweden, and Austria took issue with that.
The markets want a deal, even if it’s a watered down deal. The markets don’t want political upheaval. The European Union is becoming a fiscal union; individual governments are losing power at the same time as going through nationalist uprisings. This has blow-up potential!
If the Union can’t get a deal done in this debt crisis, after not coming together during the public health crisis, that’s a terrible look in front of citizens. It’s worth pushing for the recovery fund as it will be investors’ next catalyst for big gains in Europe, as long as it doesn’t mean death by a thousand summits for the European Union!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
