A Complex Recovery

Europe accounts for 29% of U.S. exports and 8% of U.S. revenues.That is why the Eurozone debt crisis is such a concern across the Atlantic.The domino effect is much on the minds of financial leaders in America.
Spain contributes 12% to the Eurozone economy,while Greece yields 3%.The fiscal problems in Spain are not as bad as in Greece,says Nariman Behravesh,Chief Economist at IHS Global Insight.Spain is in the second year of a recession,with 20% unemployment.The big question is,what are they reasonably gonna do?None of the countries has come up with a credible debt reduction program.A Greek default has to some extent been priced in the market,but a Spanish default could split up the Eurozone.That has not been priced in.We're talking about a multi-speed recovery,a "LUV" recovery,with Europe being the L;the U.S. being the U;and Asia being the V,in Mr.Behravesh's opinion.
Greek Prime Minister George Papandreou announced a second round of budget cuts yesterday.The first round prompted rioting.Without the promise of cuts,Greece would not receive aid from its neighbors or the International Monetary Fund.

Big Debt,High Cost

Greece is paying a high price for its national debt.Interest on one bond rose from 6.2 to 6.6%in three or four days.If unable to pay the interest,Greece would go into default.Nonetheless,Prime Minister George Papandreou denies Greece will have to be bailed out by the European Union.
In a TV address,Mr.Papandreou warned of massive budget cuts and higher taxes.There will be cuts in wages and spending in the public sector.Greece is under heavy EU pressure to defend the euro by reducing its deficit.It needs over 50 billion euros just to finance its deficit.One citizen remarked that people are angry and anxious about what will happen tomorrow.So are the governments of Spain,Portugal and Ireland,which face similar,if lesser,budgetary dilemmas.

Eurozone Budgets Under Stress

Greece has the biggest debt of the Eurozone countries-the countries that use the Euro for their currency.Prime Minister George Papandreou announced sweeping structural reforms earlier this week,saying that Greece is sinking under its debts.The country is in its worst financial dislocation since it returned to democracy 35 years ago.
Mr.Papandreou called for national unity in the face of the crisis.Greece's soaring defense budget will be targeted for reduction,but there is a real prospect of strikes.Greek leftists and trade unions have indicated that they won't tolerate any cuts.
Ireland and Spain also face a high debt load.While Greece's budget deficit for 2009 is forecast to be 12.7% of Gross Domestic Product,Ireland's is expected to be 12.5%,and Spain's 11.2% of GDP respectively.European Union budget rules set a limit of 3% of GDP.The deficits came about when the countries propped up their economies with borrowing when the financial crisis reached Europe.