Why a Euro-Zone Crisis Can’t Be Avoided Very Much Longer!

• Why a Euro-Zone Crisis Can’t Be Avoided Very Much Longer! 
  By Michael Sivy, http://www.time.com/time 
  Each postponement of financial disaster in the euro zone seems likely to last for a shorter time, and the U.S. won’t be able to escape the fallout indefinitely
  –
  Stocks rallied powerfully late last week after European Central Bank  President Mario Draghi declared that the ECB stands ready to do whatever it takes to preserve the euro. That was  mighty tough talk, but analysts remain skeptical about the outlook for the common  European currency. No one doubts that the ECB can provide short-term  support for euro-zone economies. But even so, most forecasters believe that the  euro zone is heading for a crisis. And whatever form that crisis takes, the  impact on the U.S. would be negative.
  –
  So why did the Dow gain more than 400 points in two days, rocketing  through the 13,000 mark to a three-month high, after Draghi’s speech on  Thursday? The answer is that the euro’s eventual failure has been predicted  for so long that it has become conventional wisdom. Each postponement creates a  burst of optimism — not that the crisis has been solved but simply that it has  been delayed.
  –
  But each respite is likely to last for a shorter period of time. And what has  finally happened, in my view, is that the euro has passed the tipping point.  From where things stand now, it seems as though the situation will only get  worse — and the deterioration will probably accelerate.
  –
  There are three seemingly unavoidable problems:
  –
  The next round of losses in Greece cannot be charged mostly to  private-sector lenders. When Greece was bailed out in March, banks  and other private investors took most of the losses, which they were willing to do because they also stood to lose a lot if Greece defaulted. But now that the share of Greek sovereign debt held by commercial banks, insurance  companies and investment funds has been greatly reduced, future bailouts will necessarily diminish the value of debt owned by government banks and international financial institutions.  In some cases, those lenders may be restrained by law from cooperating with any such devaluation, and at the very least the costs that result will ultimately fall on taxpayers.
  –
  read more!

end