International Financial Market Watch: Euro crisis may break out at any time

European debt crisis one after another. The beginning of the Greek debt crisis caught off guard the ECB and the European Union, has reverberations; when the near end of the year, the debt issue to hit the Irish euro weakness mechanism.

Irish Government by the end of September, said the rescue could cost its top five banks 50 billion euros, the fiscal deficit will shoot up this year to gross domestic product (GDP) of 32%, public debt will account for 100% of GDP. By the announcement of the Irish government bonds interest rate then soared. Ireland has been straight year Treasury interest rate of 9%, the German government bonds over the same period the interest rate of 3 times. At the same time, the euro exchange rate drop, Nov. 16 euro against the dollar from November 4 to 1 ratio of 1.42 to 1 ratio of 1.34 high levels of decline.

As with the debt crisis, the real key to solving the problem of Ireland is not in the hands of the Irish Government, but by the EU and the European Central Bank. It is at this point, debt problems intensified Ireland showed the euro mechanism "sheep" does not make good after the fold. Whether it is "European Financial Stability Fund" or the European Central Bank, are currently unable to eliminate the problem of market panic, such as Ireland.

After the introduction of the debt crisis in Greece "European Financial Stability Fund", does not play a role in stabilizing the market. First, because it is a "mechanism" rather than real money, save a lot of real fashion risk financing. Second, because aid is conditional acceptance of this fund, mainly the Irish may be required to raise tax rates. Ireland, the market itself is concerned, compared with the debt, aid conditions may be difficult to shirk.

With low tax rates, as the world capital of Ireland, especially the U.S. transit base for capital investment in Europe. It is this that has long been disgruntled for many European countries, accusing it as unfair competition. Many people are worried that Germany and other European powers may provide assistance to raise taxes as a condition, which is precisely the most unacceptable of Ireland. Irish national experts even suggested the EU should be bypassed directly to the International Monetary Fund for help.

The ECB's benchmark rate is still 1% of the three-month period to provide unlimited loans averaged more than 10% of the Irish banking sector's liquidity is dependent on this, the proportion is much higher than other countries. However, the euro-zone inflation is now close to 2% of the cordon, the European Central Bank to tighten monetary policy any future initiatives are likely to overwhelm the Irish banking system to become the last straw.

All in all, both the debt crisis, debt problems, or Ireland, as well as Portugal, Spain, Italy and other countries of the debt, the euro is still a fundamental mechanism from its own weakness. Whether the budget deficit out of control, or the rate of vicious competition, are derived from a unified monetary policy and fiscal policy of separation between the contradictions. Greek joint relief operations after the crisis, has taken the first step in the euro area fiscal policy coordination, but not enough. As long as the remaining loopholes in the euro mechanism, the euro crisis could erupt at any time.