Oliver's Insights - Euro-zone debt debacle and the global recovery
14 May 2010 - This note looks at the sovereign debt crisis in Europe and the European authorities' support package.
The key points are as follows:
European authorities have provided a strong lifeline for troubled European countries. This, along with the stronger state of the global economy today, should help prevent the European public debt crisis from turning into a re-run of the global financial crisis. Something similar to the 1997-98 Asian crisis is more likely in terms of global impact.
While the problems in Europe are negative for the euro and share markets in Greece, Spain and Portugal, the European support package should help contribute to a resumption of the bull market in shares once the dust settles. At this stage though, while valuations have improved significantly, its too early to say that the correction in shares is over.
Longer term, public debt problems in advanced countries are likely to remain a recurrent theme in the years ahead.
