Friday, 11 November 2011The ongoing debt crisis, which has already caused a shift in political leadership in two European economies, seems to have deeper effects on both Europe and other markets. The second-dip discussions warm up as economists warn of a shortage in demand. Asian stock exchange are directly effected by fluctuations, US firms are concerned.
The European debt crisis, which has already claimed heads of two rooted countries on the continent, is spreading to many other parts of the globe and creating concern among international monetary and financial bodies.
Lucas Papademos, a former European Central Bank vice president, was appointed yesterday to lead Greece’s new crisis coalition and will have to scramble to save the country from default and an exit from the eurozone.
Former European Commissioner Mario Monti has emerged as a favorite to replace Italian Prime Minister Silvio Berlusconi and form a new government to stave off a run on Italian bonds.
The Greek coalition is expected to be sworn in at noon GMT today, a presidential official said after Papademos struck a deal on the national unity government with outgoing Prime Minister George Papandreou and the opposition leader.
“The Greek economy is facing huge problems despite the efforts undertaken,” Papademos said as he emerged from the talks brokered by President Karolos Papoulias.
“The path will not be easy, but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence.”
Papademoswas on the mark when he said the problem was huge as the Greek crisis affected business in continents other than Europe.
Global effects
Hong Kong stocks slumped more than 5 percent, and in Tokyo the Nikkei ended down almost three percent.
The Nikkei in Tokyo closed down 2.91 percent, or 254.64 points, at 8,500.80 and Sydney ended 2.35 percent, or 102 points, lower at 4,244.10. Seoul dived 4.94 percent, or 94.28 points, to 1,813.25. In early European trade most stocks extended their losses from a day earlier. London’s FTSE 100 sank 0.69 percent, Frankfurt’s DAX 30 dived 0.41 percent and the Paris CAC 40 shed 0.36 percent. The euro fell below $1.35 for the first time in a month, hitting $1.3495 before rising back to $1.3520, against 1.3543 in New York late Nov. 9.
The shockwaves of Europe’s crisis is likely to take a toll on corporate America, particularly sellers of cars, consumer products and basic materials that generate significant revenue on the continent, a Reuters analysis read yesterday.
GM, the leading automaker in the U.S., which earns about 17 percent of its sales in Europe, warned Nov. 9 that it no longer expected to break even in the region this year, with Chief Executive Dan Akerson blaming “Europe’s economic morass.”
Emerson, which generates about 20 percent of its sales in Europe, planned to focus all of its 2012 restructuring efforts on the continent.
“Europe is definitely going to be a problem,” Emerson CEO David Farr told a conference Nov. 9. “I expect Europe next year to be very challenging for us. But I expect them to resolve this and start dealing with their issues long term.”
Shift in geopolitical power
The crisis could push Europe into a recession and hit demand for everything, said Peter Sorrentino, senior vice president and portfolio manager at Huntington Asset Advisors in Cincinnati. Any eurozone failure would send shockwaves around the globe, shifting the balance of geopolitical power and perhaps prompting a fundamental reassessment of what the world’s future might look like, Reuters said. EU sources told the agency that officials of France and Germany, the driving forces of European integration since the 1950s, had held discussions on a two-speed Europe with a smaller, more tightly integrated eurozone and a looser outer circle.
Estimates of how likely the currency bloc is to break up, how damaging it might be and what might remain afterward vary wildly. But with European leaders still struggling to find a credible response to the crisis, the prospect of one or more countries leaving – and effectively defaulting on their sovereign debt as they do so – is seen rising by the day. “You already have one of the great pillars of globalization, the United States, entering a period of difficulty and looking inward,” said Thomas Barnett, U.S.-based strategist at Wikistrat. “Now one of the other pillars, Europe, looks about to implode.”
That, he said, could leave the continent’s powers – which only a handful of years ago made up much of the G7 group of largest economies – increasingly sidelined as China, India, Brazil and others rose.
This report is compiled from AFP, AP and Reuters stories by the Daily News staff in Istanbul. |
Friday, 11 November 2011
Hurriyet Daily News
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