Eurozone

How to Profit From Europe's Best-Kept Secret

Here's a bit of global-investing trivia that I'll wager most folks will have a tough time answering: One of the world's finance ministers has attacked the International Monetary Fund (IMF) for encouraging governments to engage in excessive "stimulus" in 2009, thus giving themselves horrible deficit and debt problems in 2010.

Name the country that finance minister hails from.

I'll even give you a hint: He's not from Germany, which avoided "stimulus" but tends to be polite about the IMF and had a fairly nasty recession itself.

Give up?

He's from Poland.

Although it's a surprising answer, don't be too surprised. Poland is today the most capitalist country in Europe and has become one of the most capitalist economies in the world.

It's clearly Europe's best-kept secret.

The story of Poland's emergence is both interesting and instructive. And during a period of growing angst and uncertainty here at home, Poland represents an interesting place to put some investment capital.

Let me explain...

To find out more about the profit opportunities posed by Poland, please read on...

Irish Banks Get Bailout as Ireland Continues Drastic Moves to Leave PIGS Behind

Ireland's government will extend more aid to the nation's banks in an effort to salvage the economy and avoid going down the same path as struggling Greece.

The Irish government has set up a "bad bank" to help the banking sector rebound from massive losses on loans to property developers. The National Asset Management Agency (NAMA) will apply an average discount of 47% to $21.5 billion (16 billion euros) of loans in the first tranche. The bank will take over a total of $107 billion ($80 billion euros) of loans, transferring the debt from the balance sheets of Ireland's biggest banks - Allied Irish Banks, PLC (NYSE ADR: AIB) and Bank of Ireland (NYSE ADR: IRE).

"It looks like they are going to try and take all the pain now," said Stephen Taylor, strategist at Dolmen Securities. "It looks likely that at this stage the state is going to have to increase its ownership of the banks."

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Portugal's Credit Rating Downgrade Fuels Concern That Debt Contagion Will Spread

Fitch Ratings Inc. yesterday (Wednesday) cut Portugal's sovereign credit rating for the first time, fueling concern that the problems plaguing debt-laden Greece will spread to other Eurozone countries.

The credit ratings agency cut Portugal's credit grade by one notch to AA-, citing budgetary underperformance in 2009. Fitch warned that if the country doesn't enforce stricter fiscal discipline this year, another downgrade is possible.

"A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness," said Douglas Renwick, associate director at Fitch.

The news punished the euro, as traders placed bets that a European Union summit later this week won't be able to reach consensus on how or whether to help troubled Greece. The currency hit a 10-month low against the dollar.

Stock markets around the world have struggled in recent months as investors worried whether the trouble in Portugal, Greece, and other Eurozone countries would hamper the global economic recovery.

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Beware of Eurozone Plans for Greek Debt Bailout

An old proverb dating back to the Trojan War tells us to "beware of Greeks bearing gifts."

Today, with the fate of the European euro and perhaps even the entire Eurozone region hanging in the balance - and Greece needing a bailout to avoid default on its massive public debt - a more-appropriate warning might be: "Beware of Greeks seeking gifts."

Unfortunately, European finance ministers are looking at a bailout proposal that would amount to little more than an outright gift.

And it's a gift that - in my opinion - should never be given.

To understand the risks posed by a bailout-plan for Greece, please read on.

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Eurozone Announces Greece Rescue Plan To Encourage Investor Confidence

Eurozone countries yesterday (Monday) drew up a rescue plan to safeguard the euro in case Greece defaults on its debt in the hopes of stabilizing its currency.

Broadcasting the fact that Greece's euro partners have drawn up an emergency loan strategy is meant to steady the bond markets and give investors confidence in Greece's ability to pull out of its debt crisis, analysts said. The decision also pressures Greece to rely on its own measures for resolution.

"The objective would not be to provide financing at average Eurozone interest rates, but to safeguard financial stability in the euro area as a whole," the European finance ministers said in a statement.

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European Bailout Fund Proposal … Just Another Bad Idea

Has bailout mania finally reached Europe?

The 16 nations that make up the Eurozone are seriously exploring the creation of a "European Monetary Fund," a bailout fund that would help euro-member countries that can't pay their debts.

This has the potential to be a pretty good idea. If structured correctly, the EMF could provide the discipline and stability that the euro needs.

However, I'm not holding my breath: Given the EU's track record, the EMF bailout plan will most likely evolve into yet another slush fund for politicians - as well as a drag on the European economy.

History proves Europe's bailout-fund proposal is unworkable. Read on to see why...

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Germany: The "Must-Invest" Economy

If you're a U.S. investor, you can't be happy about the prospects for your portfolio. After all, you're mostly trapped in an economy with a gigantic and dangerous financial-services sector, a central bank that can't stop itself from printing money and a government that overspends wildly.

But there is an answer: You should consider allocating some of that "at-risk" capital to a country that has none of those problems - Germany.

Germany has a banking system, of course, but that banking system is not the overgrown financial-services monster that we have here in the United States (or, for that matter, in Great Britain). It's impossible to get a subprime mortgage in Germany: Even now - and even after mortgage levels have crept up in recent years - the average down payment for the purchase of a new home in this key Eurozone nation is 50%. As a result, the homeownership rate in Germany is only 43%, the lowest rate in the European Union.

That's actually healthy; far less of Germany's capital is tied up in unproductive housing and the savings rate is correspondingly higher. (Let's face it, most Americans don't accumulate 50% of the cost of a house in savings over their lifetimes - unless forced to do so in a company pension scheme).

To find out how to profit from Germany's promise, read on...

As Greece's Woes Demonstrate, the Fuse Has Been Lit on the Global Debt Bomb

The big story in the international markets so far in the New Year has been the increasing shakiness of a number of countries' government bonds, with Greece right now being the most troubled of all.

Since U.S. investors tend to avoid foreign government bonds, many will dismiss this as an irrelevant development.

That's a mistake. The reality is that the international implications of this bond-market problem are serious for the world's stock markets, as well as for the global economy as a whole.

The fuse has been lit on a global debt bomb. And Greece has quickly become a poster child for the explosion that's all but certain to occur.

To find out all about the "Global Debt Bomb," read on...

Will Greece Default on its Debt, and Take the Eurozone Down with It?

As the European Commission holds its regular monthly meeting in Brussels this week, ministers find themselves debating what to do about the Greek debt crisis — the biggest credibility test the Eurozone has faced since the single currency was created.

The question is whether the 16 countries that share the European Union's (EU) currency can force a rogue member with a weak economy to take drastic measures to cut its budget deficit without calling in the International Monetary Fund (IMF) or sparking social unrest.

Still in the depths of recession, Greece is plagued by a spending deficit that rose to 12.7% of gross domestic product (GDP) last year, far in excess of the 3% ceiling permitted to countries in the union. It's also saddled with debt amounting to 113% of GDP, which prompted Moody's Corp. (NYSE: MCO) to downgrade its debt to A2 from A1 on December 22.

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OECD More Than Doubles 2010 Forecast, as China Leads the World Out of the Recession

The Organization for Economic Cooperation and Development (OECD) more than doubled its 2010 forecast for developed nations, saying that strong growth in Asia – particularly China – would help pull the “more feeble” West out of its financial malaise.

After predicting in June that the combined economy of its 30 member nations would grow 0.7% in 2010, the OECD raised its forecast for developed economies to grow 1.9% next year and 2.5% in 2011. Economic output will contract by 3.5% this year, the Paris-based organization said today.

We now have the numbers that support a recovery in motion,” Jorgen Elmeskov, the OECD's acting chief economist, told Bloomberg News. “It's still a slow recovery because of considerable headwinds from the need to adjust the balance sheets of households, enterprises and financial sectors.” The OECD cautioned that the recovery is still fragile in developed nations, while pointing to China as the main catalyst for a global rebound.

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Eurozone Emerges From Recession, but Recovery's Obstacles Will Prove Challenging

The Eurozone economy officially emerged from recession in the third quarter, but the uneven growth throughout the region and the lingering dangers of high unemployment continue to pose a threat to the recovery.

Comprised of the 16 nations that use the euro currency, the Eurozone saw its economy expand by 0.4% in the third quarter from the previous three-month period, Eurostat reported. However, the economy continued to shrink year-over-year, dropping 4.1% after a 2.8% annualized drop in the second quarter. The greater 27-nation EU economy grew by 0.2% on a quarterly basis.

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Eurozone Growth Revised Down as Inflationary Pressures Trump Economic Growth

By Jason SimpkinsAssociate Editor First-quarter growth in the 15-nation Eurozone was weaker than first reported, yet another worrying development for a region already struggling with soaring inflation. The combined Eurozone economy grew by 0.7% in the first quarter compared to the three months prior, revised down from a previous forecast of 0.8%, Eurostat reported. While […]

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