This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

IMF Needs to Address EU Insolvency Issues

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- The IMF is the key organization in the world's complex currency system. It was founded in the immediate post-World War II period (Bretton Woods) and is an important regulator of the currency system now that the world's major currencies are all fiat (no real asset backing or restraints).

To date, the IMF has played a key role in dealing with the debt issues surrounding the EU's weak sisters. If Greece is allowed to default, the Greek banks will all become insolvent, virtually guaranteeing a long-term depression in that country.

The European banks, which hold $72 billion of Greek debt and $165 billion of loans to Greece's private sector, could muddle through a Greek default, but most would be severely wounded -- with significant consequences for European growth in the near term.

Now, here is the crux of the issue. If Greece is allowed to restructure, what is to prevent Ireland from following suit?

Look at the exposure of the European banks to Ireland:

  • Germany: $215 billion
  • France: $82 billion
  • Great Britain: $237 billion
  • ECB: $244 billion
  • If Greece were allowed to default, the European banks could not handle an Irish, Portuguese, or Spanish default. So, now the importance of the IMF should be perfectly clear. Dominique Strauss-Kahn has been an important player for the IMF in dealing with all of these debt issues, and, it remains to be seen if his absence will have an impact.

    >> Time to End Europe's Hold on IMF Leadership?

    My own personal view is that default and a restructuring of the debt of these weak nations is inevitable. The solutions offered, so far, have treated these debt issues as if they were only liquidity problems instead of what they really are -- solvency issues. Eventually, the insolvencies need to be addressed, and with it, the very survival of the EU itself.

    Check Out Our Best Services for Investors

    Action Alerts PLUS

    Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

    Product Features:
    • $2.5+ million portfolio
    • Large-cap and dividend focus
    • Intraday trade alerts from Cramer
    Quant Ratings

    Access the tool that DOMINATES the Russell 2000 and the S&P 500.

    Product Features:
    • Buy, hold, or sell recommendations for over 4,300 stocks
    • Unlimited research reports on your favorite stocks
    • A custom stock screener
    Stocks Under $10

    David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

    Product Features:
    • Model portfolio
    • Stocks trading below $10
    • Intraday trade alerts
    14-Days Free
    Only $9.95
    14-Days Free
    Dividend Stock Advisor

    David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

    Product Features:
    • Diversified model portfolio of dividend stocks
    • Updates with exact steps to take - BUY, HOLD, SELL
    Trifecta Stocks

    Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

    Product Features:
    • Model Portfolio
    • Intra Day Trade alerts
    • Access to Quant Ratings
    Options Profits

    Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

    Product Features:
    • Actionable options commentary and news
    • Real-time trading community
    SYM TRADE IT LAST %CHG
    AAPL $131.78 0.00%
    FB $80.14 0.00%
    GOOG $539.78 0.00%
    TSLA $251.45 0.00%
    YHOO $43.07 0.00%

    Markets

    DOW 18,126.12 -36.87 -0.20%
    S&P 500 2,120.79 -2.69 -0.13%
    NASDAQ 5,097.9760 -8.6170 -0.17%

    Partners Compare Online Brokers

    Free Reports

    Top Rated Stocks Top Rated Funds Top Rated ETFs