By TraderVox.com
Euro zone governments have been able to rescue the region from a possible Greek default, but the debt crisis is far from over. After the finance ministers prepare to sign the bailout deal, there are concerns that as Greece tries to force the recalcitrant bondholder to comply, it might cause a major credit event in the region.
For some analysts, the Greece bailout deal and the refinancing done by the ECB have had tremendous effects on the region’s economy, but much needs to be done to safeguard against contagion.
Countries’ such as Ireland, Spain, Portugal, and Italy are showing signs of following Greece. Spain, which has shown signs of trouble for the same period as Greece, has announced that it could not meet last year’s deficit target and it is slated to default in 2012.
Some analysts have stated that Spain might be the cause of the next euro zone crisis creating fears and causing risk aversion measures. While there has not been great impact in the Forex market, crisis in Spain might not spare the market since Spain is among the five major economies in the region.
Market participants are also keeping a keen eye on the developments in Portugal as the government continues to face high financing costs. According to Germany’s Finance Minister Wolfgang Schaeuble the euro region should not rule out a third bailout plan in 2012. The crisis in Europe is expected to force the ECB to push the benchmark interests to below zero to ensure economic recovery.
The euro continues to decline against the dollar as investors keep looking for opportunities to selloff their risks. Safe haven assets seem to be gaining demand as investors keep watch on the actions to be taken by Greece after the March 23 deadline for the recalcitrant bondholders to comply with the Collective Action Clause. The euro region is far from crisis and further action will have to be taken to reverse the situation. Region’s troubles are further compounded by the negative trade data report from China.
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