EURO FALLS ... even more

From Bloomberg News: "The common currency [Euro] fell against 12 of its 16 most-traded peers after French and German leaders agreed any aid package for Greece would require help from the International Monetary Fund, denting confidence in the European Union. "

WSJ: It is a 10-month low against the dollar. Overall, the Euro has fallen more than 6% against the dollar.

MEMORABLE: Italian Finance Minister Giulio Tremonti meanwhile said the IMF should be used as an "intermediate" solution, "as a bank and for its know-how, but under political management" by Brussels, ANSA news agency reported.

IMF involvement would be "a move that reveals a fundamental break-down of Europe’s governing machinery." A report by UBS entitled "How to Break up a Monetary Union" has been circulating like wildfire in financial centres.

The problem seems to be spreading. "In another sign that Europe's sovereign debt problems are worsening, the ratings agency, Fitch, has cut Portugal's credit rating because of concerns about the country's deficit." All this while "Europe is locked in frantic Greece talks."

Burdened by debt of nearly 300 billion euros ($440.98 billion), Athens has had to slash its huge public deficit of 12.7 per cent of output, or four times the EU limit, triggering strikes and violent protests on its streets.

And the U.K. isn't far behind, predicts the Financial Post.


The problem with the Greece debt is nicely explained here.

Greece has around euro20 billion of debt maturing over the next couple of months and wants to avoid paying sky-high premiums demanded by investors as compensation for the added risk of holding shaky Greek debt. A financial backstop would relieve fears about Greece's ability to pay and lower those rates.

At the moment, the spread between Greek and German 10-year bond yields stands at over 3 percentage points, meaning that Greece has to pay interest in excess of 6 percent just to get investors to lend it the cash.

That's unsustainable in the long run.

March 25 - From The Times (London) a story by David Charter sums up the problems with: "Europe in crisis as debts grow and Germany pursues its own interests, say diplomats" on the lack of leadership.

The Lisbon treaty was supposed to streamline decision making. Instead, the EU now has a European Council President, a European Commission President, a High Representative and a rotating presidency, all jostling for power

While Brussels is paralysed by infighting over the new European foreign service.