The European Debt Crisis
The map below will show each economy in the Euro-zone with their relevant debt ratings. Countries whose bonds are considered ‘junk’ are in red, countries carrying a rating of A or higher in a various shade of purple. Lighter shades of purple indicate weaker bond ratings, the majority of which result of downgrades brought by exposure to the European Debt Crisis.
Countries in ‘amber’ carry a BBB+ rating, which is one only one level before they are also considered trash. The worrying thing is that 2 of the world’s top 12 largest economies ‘Spain and Italy' have the BBB+ rating. Interestingly, Switzerland has the rating of AAA, although they do not use the Euro as their currency.
Greece and France were shouting loudly in the beginning of May, who elected officials that promised a new turn on the debt situation; however a long term fix continues to remain illusive. We will now attempt to answer some very important questions:
- The problem is getting worse, why?
- Economic policy makers could fix the problems, how and where do they begin?
- Most importantly for us. How can we investors and traders protect ourselves during these uncertain times.
So Why is the European Debt Crisis getting worse?
Introducing ‘Fragmentation'. This is where a number of economies that are part of the Euro-zone are so diversly different, that it is very difficult to come up with a common application of monetary policy without creating a wrath of problems.