Europe crisis a concern for investors
Fri, 29 Jun 2012 6:24p.m.
By Tony Field
The New Zealand dollar edged close to its all-time high against the euro overnight.
European leaders have agreed to help Spain's banks, but many investors are worried the region's problems are simply too big to solve.
Forced smiles couldn't hide the divisions at the latest European summit, with the richer northern nations in stark contrast against the debt-ridden south.
Finnish prime minister Jyrki Katainen said it is unlikely that any miracles will come out of the summit.
"It’s difficult to find any miracles because we have our rules and we have to stick to them,” he said.
These problems are the reason money is flowing out of Europe and into countries like New Zealand which are considered safer investments.
Commodity prices, like oil, and dairy are falling, and although Europe is not such a big market for New Zealand, it is for our biggest trading partners - Australia, China and the US.
Prime Minister John Key has predicted a decade of weak growth for Europe, and today described Spain as South Canterbury Finance on steroids.
But he says its leaders will do whatever it takes to keep the euro together, because they know the dangers of a divided Europe.
“These are countries that in their history have been at war and they have always seen Europe and the euro as a project to bind them together and peacefully hold them together,” he said.
The problem is there are only so many times you can kick the can down the road before you reach a dead end.
And it seems the higher the stakes for Europe - the more divided its leaders become.
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