It seems the financial world is finally ready to cut economic ties with both the Euro and its literally largest sponsor, Germany. Most relevantly, as DailyFinance.com reports, “Germany, the stronghold of the European Union, just had one of its worst bond auctions ever. Total bids at the auctions came to 3.9 billion EUR vs. 6 billion EUR issued.” In short, “The low returns of 2% annually over 10 years simply wasn’t enough to lure investors who still aren’t sure how the debt crisis will play out.”
So here’s the deal (as some of us have been screaming from the proverbial mountaintops for months (if not years) now): Not only is the EuroCrisis now obviously and painfully an unrestricted financial disaster that will inevitably poison (and constrict) the world’s financial and credit markets, but those key players within the EuroDrama – including, as illustrated in this case, the Euro’s key financial pillar, Germany – now find themselves without access to capital markets once assumed “inevitably” available from which to bring in quick cash. In short, not only is the EuroZone headed for trouble (taking with it, of course, the global economy), but so too are the countries once thought unassailable by both investors and ratings agencies.
What’s this all mean for Germany? Obviously, things have to change, not only internally, but across the entire EuroZone. What today’s failed bond offerings demonstrate most effectively is that Germany can no longer carry on its back an increasingly and cripplingly heavy and failing European Union. Instead, a combination of immediate policy and financial remedies are necessary to buoy both Germany specifically and the European Union generally.
Without such changes, who knows how truly deep and broad this EuroDisaster will hit the global economy?
Margaret Bogenrief is a partner with ACM Partners, a boutique crisis management and distressed investing firm serving companies and municipalities in financial distress. She can be reached at [email protected]
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