Collapse of the Portugese Gov't what next?

[horusd]

Portugal's gov't collapsed last night after a failed austerity budget,and Spain has been downgraded yet again by Moody's. Looks like we're going to have more company in the Euro dog-house. Yet the German's et al are under political pressure at home. The Euro seems caught between a rock and a hard-place. The reality of unsustainable debt and the political consequences of trying to resolve it in "rch" countries. One EU politican commented a few months ago that "we know what to do to save the Euro, but we don't know how to get elected afterwards". Without rehashing old posts about Euro survival etc, something needs to give, how can this problem be solved?

 

[Chris]

That's a great quote. I imagine that what he thinks needs to be done is print and borrow loads of money to bail out weaker countries. Of course this is immensely unpopular in those countries that have not found themselves in debt problems due to fiscal prudence.
The best thing that could happen is for countries to be allowed to default. The euro would be hit hard in the very short term, as various investors liquidate different assets in affected countries. But it would be an extremely strong signal for the long term, as it would show the investment community that fiscal imprudence would no longer be accepted.