Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
Investing legend Jim Rogers said that although the latest Eurozone deal for Greece is more generous than he expected, it's not enough to solve Europe's problems.
"Politicians have delayed addressing the problem yet again," Rogers told Investment Week. "It will come back in a few weeks or a few months and the world will still have the same problem, but this time only worse because the European Central Bank and other countries will be deeper in debt."
The deal European leaders hammered out on Thursday includes boosting the region's rescue fund to $1.4 trillion (1 trillion euros) and asking bondholders to take a voluntary 50% haircut on Greek debt.
Rogers said while the deal isn't enough to fix the issues, the haircut was more than he expected. The writedown on Greek holdings means $3.7 billion in debt-insurance contracts won't be triggered.
"Never in a million years did I expect them to impose a haircut of 50 percent; this shows at least somebody is starting to accept reality," said Rogers.
Rogers said haircuts are a necessary step in fixing Europe's plaguing debt crisis, and more should be implemented.
"Greece is bankrupt, but others are too, and these haircuts will have to come back and be wider," said Rogers.
But until more stringent and widespread action is taken to alleviate not just Europe's debt but that in the United States, the crisis will continue.
"Most European countries are increasing their debt rather than decreasing their debt," Rogers said. "Until that changes, the problems are going to continue, just as they will in the U.S."
News and Related Story Links:
- Money Morning:
European Contagion Turns Positive, Will it Last?
- Money Morning Video:
Avoid the "Euro-Whipsaw"
- Moneynews.com:
Jim Rogers: Greece Deal Not Enough to Save Europe
- The Wall Street Journal:
Next Act-The Plan Is Put to Test .
When you look at the "haircut", it appears more like a trim. Once again, the public will be expected to pick up the bill. At the end of the day, we can do this the hard way, or the easy way. It looks like the money masters are choosing for the hard way.
Jim is right, but the bigger balloons and bigger hair cuts are waiting in Italy, Spain and Portugal.
The free spending, travel dependent economy of Greece, is a tragedy of a thmbnail nation, trying to spend freely like the US, without realising that, it dos not have its size or its natural resources.