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At Risk Eurozone Sovereign Credit Ratings

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Its unemployment rate is 23%. Around half of all youths can't find work. A million or more people may lose homes, the equivalent of seven million in America. Its income inequality is the highest since the EU's Eurostat (its official statistics agency) began analyzing income distribution in 1995.

Following the fall 2007 crisis, its PSOE government clashed salaries up to 15%, attacked pensions, cut child benefits, introduced destructive labor reforms, and ended banning employing contracted temp workers indefinitely.

Expect Spain's new right-wing Popular Party (PP) to pass stiffer austerity measures. As a result, anger may explode more than already. Spain's a power keg. New Prime Minister Mariano Rajoy wants all Spaniards working together. Punished workers may take another route.

Unemployment, homelessness, strikes and mass protests are increasing. Bond investors want no part of Spanish debt. It's priced nearly 5% above equivalent German bonds. It's nearly fourfold the 2008 peak level and beyond what triggered Greece's collapse.

Moreover, in one month, Spain's 3-month sovereign yields doubled to over 5%. Its new government won't fare better than previous ones. Names and faces may change, but problems remain and grow. If Spain defaults, it's too big to save. So is Italy, and, of course, America dwarfs them all if it falls.

Everywhere, especially in troubled sovereigns, governments spend all their resources. They're borrowing all they can get internally and abroad. Push is rapidly reaching shove. A day of reckoning too onerous to manage approaches.

Funding holes for European banks are deepening. The Financial Times said they managed to roll over just $413 billion of the $654 billion due this year. As a result, they've got a huge $241 billion funding gap. In 2012, $720 billion in debt comes due. 

Europe's banking sector deleveraging problem grows greater than they're able to handle. The FT says disposal assets on their balance sheets total $3.3 trillion in the next few years. Who has pockets deep enough to absorb it?

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America's in greater trouble than people realize because of extreme speculative excess. Toxic derivatives impose crushing burdens. The Comptroller of the Currency estimates banks held $176 trillion of them at the height of the 2008 debt crisis. Today, US banks hold $249 trillion, 41% more.

Moreover, America's crushing federal debt exceeds 118% of GDP. Add unfunded liabilities and it's over $120 trillion. Totals rise despite imposed deficit reduction measures and proposed new ones. Over $1 trillion added annually compounds an already unmanageable burden.

Expect international creditors to balk. Borrowing will get tougher. Economic decline will follow. A burgeoning new debt crisis will dwarf 2008. Its effects will spread globally.

Progressive Radio News Hour regular Bob Chapman believes "Europe still does not have a longer-term structural solution to its debt crisis and none is in the offing."

The Eurozone's crisis is undermining the entire continent. It has global effects. Worse yet, he learned, "the Bundesbank usually holds back bonds for market making operations." It only sold about half its latest issue. "If the crisis continues to deepen, Germany and the other eurozone nations will have to reexamine where they are headed."

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Eurozone 10-year debt costs close to 7%, the highest level since the euro's creation. The 2% spread between France and Germany's unprecedented. Bond markets can't function without ECB help. Sovereign government debt is unmanageable. Increasing it makes it worse.

Italy's largest bank, Unibank, has $51 billion to refinance. Its bond yields now yield over 10%. Only the ECB can bail them out like the Fed does for Wall Street. 

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I was born in 1934, am a retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

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When Rome collapsed we went into the dark age. The... by Theresa Paulfranz on Wednesday, Nov 30, 2011 at 11:17:21 AM