Fresh Concerns Rises over the Fate of Euro Region

By TraderVox.com

Tradervox (Dublin) – Fresh concerns over the fate of the euro region have been raised as a possible Greek scenario is expected to be repeated in Portugal and Italy. Italy’s Prime Minister, Mario Monti, is set to meet labor unions to discuss a possible restructuring of the labor laws in the country. Analysts are warning that Italy and Portugal may be on the verge of possible Greece-case scenario.

This has come amid fears that Greece might need a third round of bailout funds as the new bonds are not doing well in the market. German Chancellor Angela Merkel have indicated that the European officials are discussing possibility of combining its rescue funds which might lead to increase in the total crisis fund kitty to 692 billion Euros.

In Italy, the Prime Minister is holding talks with labor unions and employers as the nation seeks to reach an agreement this week. Policy makers in the euro region have, however, issued warning against complacency as they finalized on the Greece bailout fund. The world’s largest debt restructuring will be completed tomorrow when the money will be disbursed.

Christine Lagarde, the IMF managing director, warned that the optimism in the euro region should not be construed to give a sense of security. She said that things cannot be “business as usual” as oil prices are expected to rise as Iran crisis continues. The emerging risks of default in Italy and Portugal are other factors that should be monitored closely as the region tries to avert a dangerous credit crisis.

According to the IMF, the Greek crisis solution holds possible risks that might lead to disorderly exit from the monetary union if not handled carefully. An IMF staff indicated that the materialization of such risks requires the region to have a backup plan to offer additional support. These sentiments seem to coincide with Luxembourg Prime Minister Jean-Claude Junker’s remarks that the leaders have a plan B in case the efforts made by the region fail to work. However, investors are still keeping a close eye to see whether contagion will spread to Italy, Portugal and Spain.

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