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Euro Crisis Is Coming Back…Again


Let's face it. The festering U.S. budgetary battles of the past four months have pretty much dominated the investment news, offset only a smidge by a budding narrative of improving economic data and record high stocks prices. Amidst this domestic backdrop, we have been able to largely ignore the broader, global climate, including a pesky European crisis that is attempting to make another comeback.

In the past week alone, we've seen the Prime Minister of Greece declare that his country is done with austerity, we've watched the Italians try to piece together a ruling coalition, and observed the French back-peddling from a ruinous 75% tax rate scheme. It's all part of what Bruno del Ama, CEO of Global X Funds, sees as a process that is still in the third or fourth inning.

"Getting over the deleveraging process in Europe is going to take a long time," del Ama says in the attached video, pointing out that since they have not been hitting the money printing press the way we have, it means "the only way to get over it is deflation, which is lower incomes, significant unemployment and that's a long process to go through."

Just today, competing articles on Yahoo! Finance debate the state of the Eurozone, with one saying the crisis is not over and the other arguing, optimistically, that it could all be done this year. While the risk of a Eurozone breakup is clearly lower today than a year ago, del Ama says it's the kind of cataclysm the world doesn't need to happen right now.

"In some ways, the shock of (a Eurozone break-up) is a little bit difficult to understand how it will come through the capital markets," he says, "but it will definitely have an impact globally unfortunately."

Even inside the Eurozone, reports suggest that doubts still persists as to its validity and usefulness. A recent survey in Germany showed 26% of voters would back an anti-Euro party. It's a trend, and a degree of doubt, that del Ama says is ''trickling up" in the so-called core and peripheral countries of the economic bloc.

Of course there is no way of knowing how bad or deep the European recession will get, but already the European Central Bank has trimmed its forecasts and made an effort to reassure itself and the world, that ECB monetary policy “will remain accommodative for as long as needed.”