Fears Intensify That Euro Crisis Could Snowball

As Europe strives to bail out Greece and other nations in serious debt, global investors ponder the long-term effects of huge imbalances. The worry is that countries with massive debt like Spain and Portugal can weaken strongholds like Germany and France, reports an article in the New York Times. Economically strong countries that hold problem debt may be forced into restructuring plans even as short-term borrowing costs rise. US lenders – notably the money market funds, uninsured yet regarded as safe – have become wary of the European bond market. Investors who looked abroad for profits now seek safety close to home. Decreased liquidity adds to the instability, as borrowing remains one of the few tools available to policymakers. – YaleGlobal