Euro Zone Paper Tsunami

Portugal's €78 billion bailout from the IMF and European Union requires Portugal to cut its budget deficit from 9.1% of GDP to 5.9% in the short term, and further reduce the deficit to 3% of GDP by 2013. I feel it is very unlikely Portugal will meet these goals.



The first Greek bailout has essentially failed, in less than one year it was obvious. Another bailout will only prolong the eventual default. The requirements of the bailouts force these less stable Euro nations to cut deficits in shrinking economies and somehow produce enough real growth to justify the additional debt load incurred while "biding time."


What will lead to the domino effect of defaults in Europe, is the interconnectedness of the sovereigns' debt load and the European commercial bank assets. The chart above, from Goldman Sachs, shows the large exposure Euro banks have to just four deeply troubled nations.

Money creation in the name of stabilization. The Euro Zone has officially stolen the US playbook for temporary solvency.