Have you ever tried to reach for the cookie jar only to have someone slap your hand away at the last moment? Well, a multibillion euro bailout plan for Eastern Europe was denied and the pain may be felt by other countries and exchange traded funds (ETFs), linked to this region.
On Sunday, Germany, the region’s largest economy, and the Netherlands rejected a general bailout plan and dismissed the suggestion of Eastern European countries’ entry into the euro, reports Constant Brand for Yahoo! Finance. The eastern EU members are suffering from depreciating currencies, diminished demands for exports and higher debts due in part to weaker currencies.
Eastern EU nations have entreated the EU bloc to consider easing up requirements for entry to the euro currency because the 16-nation currency has thus far provided a steadfast safeguard in uncertain times.
Since eastern members of the 27-nation EU bloc are being hit the hardest, it is suggested that the EU fund needs to provide $241 billion to restore solvency in the eastern region. Some conjectured that the eastern EU countries may need up to $380 billion, 30% of the regions GDP. Failure to offer a substantial bailout “could lead to massive contractions” in the region’s economies, and coupled with “large-scale defaults” it may ultimately affect the whole of Europe.
But the EU Commission President Jose Manuel Barroso does not see the necessity of a new bailout plan because Eastern European countries already received billions in emergency loans from the EU, the World Bank and other financial institutions.
SPDR S&P Emerging Europe (GUR) could feel the effects of the hand slap. It’s weighted 13.8% Turkey; 12.2% Poland; 7.4% Czech Republic; and 5% Hungary.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.