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Is It Too Late?

December 5, 2011 – 5:54 pm

France’s Sarkozy and Germany’s Merkel have been sending out signals that they are serious about doing some fundamental changing how the EU operates. Their plan appears to be trying to bring the various diverse EU countries closer together fiscally. That means tightening the rules concerning deficit spending. We do not know the outcome as meetings continue this week.

Most experts feel that there are only two options at this stage. Either the Euro breaks apart resulting in chaos for a period of time or the various countries operate more like a confederate of states similar, but much looser, than the individual states in the U.S. The Europeans have been living on debt for decades with ever more outsized spending. Though most of the countries have very high income taxes it is and has not been enough when spending is never reined in.

If Merkel and Sarkozy come up with a believable and strong enough plan with real reform then the market that buys and sells the government bonds may decide that their push up in interest rates may not be necessary. That would reduce the burden on the countries trying to finance past debt obligations and begin the long path to better financial health.

Of course wanting a solution and achieving a solution are two different things. The story is going to continue with all eyes focused on Europe.

Good Trading
Steve Peasley

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