Debt Crisis

I guess it is obvious that Europe’s debt crisis is so extreme that coming up with any solution is elusive at best. Banks won’t be able to take the haircut necessary, the ECB doesn’t have the funds to absorb much of the massive debt and the IMF won’t do much until there is some kind of assurance the EU countries can manage their budgets with huge spending cuts. In the meantime the economy in Europe is teetering on the edge and holding back what might be a solid global economic rebound. In the case of Greece, if it does default the repercussions in US markets may not be as serious as investors now believe. Estimates we hear are that the US equity market might lose 3.0% to 5.0% if Greece defaults; not good but if that were all there is likely it would be recovered quickly. Where the serious implications occur is a Greek default would likely leads to other sovereigns tossing in the towel unwinding the EU.