US debt crisis: failure to tackle debt sends global markets into tailspin

Thursday, July 28, 2011
By Paul Martin

Global stockmarkets fell sharply amid fears
that politicians on both sides of the Atlantic
were losing their grip on sovereign debt crises.

By Louise Armitstead
27 Jul 2011

Shares fell by more than 1 per cent in Britain, Germany, France and Spain as traders lost confidence in Europe’s €159 billion (£140 billion) bail-out package for Greece, less than week after it was unveiled.
Traders were also rattled by the continuing deadlock between President Barack Obama and the Republican leaders of the House of Representatives over how to raise the US “debt ceiling”. The politicians have until Tuesday to broker a deal or America will be unable to pay the interest on its $14.3 trillion (£8.8 trillion) debts.

Cyprus threatened to become the fourth eurozone country to require a bail-out after Moody’s downgraded its debt to two levels above junk. The credit rating agency raised concerns that Cyprus’s significant exposure to Greek bonds – which is among the highest in the eurozone – might hamper its ability to service its own sovereign debt.
Michael Woolfolk, from Bank of New York Mellon, said: “The immediate crisis has passed, but it hasn’t fixed the underlying problems, and that’s why the market has been less than excited about holding euros.”
He added: “The Republicans and Democrats will find a compromise that cuts spending and is unlikely to lead to a debt downgrade, and then the focus will once again turn to Europe.”

The Rest…HERE

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