Daily Gains Letter examines the growing debt problems being faced in the eurozone and how it could lead the region to another financial crisis.
www.DailyGainsLetter.com), an e-letter published by Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, warns that current debt troubles in the eurozone could translate into a repeat of the 2009 financial crisis that plagued the region.— Daily Gains Letter (
Economic troubles that first surfaced in the eurozone back in 2009 stemmed from the credit market. The amount of bad loans increased, and as a result, banks needed to be bailed out. Greece and Ireland were the first in the eurozone to come under scrutiny, followed by Spain and Portugal, with concerns later growing over whether Italy needed a bailout.
“In 2012 and 2013, the eurozone experienced relative calm. This was mainly because the European Central Bank said it would do whatever it needed to in order to save the eurozone, sending a wave of optimism through the global economy,” says financial analyst Moe Zulfiqar. “Now, we are starting to hear about an increase in bad debt loans again.”
Data from the Bank of Spain showed that bad loans in the country grew to a record high in November 2013, standing at 13.08%, compared to 12.99% just a month earlier. Month-over-month, bad loans in the fourth biggest eurozone economy grew by 1.5 billion euros. (Source: “CORRECTED-Spain’s bad loans ratio reaches new record high at 13.08 pct in Nov,” Reuters web site, January 17, 2014; http://www.reuters.com/article/2014/01/17/spain-badloans-idUSE8N0FI02B20140117.)
“Banks in Italy, the third biggest economy in the eurozone, are experiencing similar problems,” Zulfiqar explains. “Standard & Poor’s expects bad loans at the Italian banks to increase to between 310 billion and 320 billion euros by the end of 2014. This would be similar to 18% of all loans.” (Source: “Full recovery a long way off for Italian banks -S&P,” Reuters web site, January 21, 2014; http://www.reuters.com/article/2014/01/21/italy-banks-idUSL5N0KV3UG20140121.)
Greece, one of the early victims of the debt problems in the eurozone, hasn’t really shown much improvement, with the percentage of bad loans compared to all loans in the Greek economy expected to increase to 40% this year. According to its most recent data, the Bank of Greece said loans that were overdue by three months made up 29.3% of all loans. (Source: “Bad Loans Overwhelm Greek Banks,” Greek Reporter web site, January 22, 2014; http://greece.greekreporter.com/2014/01/22/bad-loans-overwhelm-greek-banks/.)
“Taken collectively, one must ask if there’s another financial crisis waiting to happen in the eurozone,” Zulfiqar concludes. “Time will tell, but all of these problems arising in the eurozone are creating an interesting investment opportunity for investors here in the U.S.”
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