Group items tagged

After a nearly $1 trillion rescue package meant to end Europe's debt crisis once and for all, financial markets took a second look Friday and began to worry about how the plan would actually work and the implications of the drastic austerity measures for the fragile European economies.

Former Federal Reserve Chairman Paul Volcker said he's concerned that the euro area may break up after the Greek fiscal crisis that sparked an unprecedented bailout by the region's members.

As Spain's credit rating is downgraded a day after Standard & Poor's cut its ratings on Greek and Portuguese debt, how far could the eurozone's debt contagion spread?

Fissures among Europe's currency partners are becoming even deeper and more widespread than was previously evident, raising new doubts about whether the group can resolve the regional debt crisis that has simmered for more than a year.

In years past, when financial crises in Argentina and Russia left those countries unable to make good on their government debts, they simply defaulted. But this time around, swaps and other sorts of contracts have become so common and so intertwined in the financial markets that there are fears among regulators and financial players about how a Greek default would play out among derivatives holders. No one seems to be sure, in large part because the world of derivatives is so murky. But the possibility that some company out there may have insured billions of dollars of European debt has added a new tension to the sovereign default debate.

European banks have hog-tied their governments, replacing Parliamentary democracy with dictatorship by the ECB, which is blocked constitutionally from creating credit for governments - until German and French banks found it in their own interest for it to do so.