Will The Euro Collapse?

EFSF (European Financial Stability Fund) includes 27 members of the European Union and was created on May 9, 2010.    EFSF works closely with Germany to issue bonds on behalf of the insolvent European nations such as Greece, Spain, and Italy.

On July 11, 2011, the EFSF role expanded regarding the solvency responsibilities.  The Greek example shows that the EFSF has bailed out the banks more than they've bailed out the country.   Greece participated in IMF bailouts and was able to avoid high interest rate penalties; however, this luxury does not extend to Spain or Italy because they yet to receive any bailout money.

“The euro is breaking down,” Mr. Greenspan said last week. “The reason we’re so sluggish is the level of uncertainty.”

Since Germany remains the key player in the EFSF, it risks its own AAA credit rating if it participates in the backing new bond issuances to restructure the high interest Spain and Italy debts.  If Germany does not participate in these financial restructurings, these sovereign debts will become insolvent and wreak havoc on the already fragile world markets.  It would crash the Euro and cause the next Great Depression.

The financial world is teetering on the edge.  For those that think the worse is behind us, think again.   The worse is yet to come.

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