Also in this playlist...
This transcript is automatically generated
Well fox does -- alert -- debt crisis back with a vengeance.
As a Portuguese government collapses Portugal's failure to pass critical austerity measures sending the Euro -- scrambling to prepare for another high cost bailout -- continent's big financial woes have a history of -- US stocks here Irish debt concerns.
Took -- 178.
Point bite out of the Dow last November.
And Greece riots -- 116 points in the blue chips the previous may.
Remember of those rights -- of things right here so well Portugal's rejection of austerity measures small -- in our market rally Fred -- Says now he is director of the Peterson institute for international economics he joins us now -- -- Fox Business exclusive good to see again for itself.
I look at this is bad news I mean I see the the the parliament rejecting any any move to austerity I see the prime minister submitting his written resignation as a result.
Looks bad to me what's a silver lining.
I think what this clarifies.
Is that there will have to be a new Portuguese government.
It will have to put together a new adjustment plan and it will require a bailout from the European Union and the International Monetary Fund.
If the Portuguese -- pass this plan.
They might have been able to limp along for a while longer.
Prolong the agony but now the crisis is full blown as you say.
But I think the outcome is absolutely clear as with Greece as with -- there will be a bail out.
It will include a Portuguese economic reform program that will begin to substantially deal with their problem.
I therefore view it as cleaning up the European mess.
We've known from the -- a year ago that there were three weeks sisters Greece Ireland Portugal.
The timing of those dominoes falling he's always been a little unclear now I think we see it at over the next two or three months I think a bail out of that type will be worked out.
I think it will then be clear.
That there will not be any spill over to Spain to Italy to other parts the European Union.
And I do think this will clear the decks I do not think it will roil the markets because the markets knew -- was coming.
They now see it's -- the timetable is fairly clear and I think you'll actually put the European crisis is behind is rather than treated you well disruptions.
You know -- is bigger than all three of those other nations combined that you cited.
How -- not worried about Spain after Moody's has downgraded the country and downgraded thirty of its banks.
Two reasons I think Spain while it has been downgraded.
Has taken some very substantial moves to shore -- banking system.
It's good bags -- and there is the other big ones are all -- very good shape everybody agrees to that.
Their problems a -- these smaller cops they are now being consolidated.
They've got new regulatory mechanisms in place and they have run very effective stress tests the government there has run the most effective stress this in Europe.
That's led them then turned to consolidate the bags require them to cap recapitalize.
Put new regulatory mechanisms in place.
And I think they're all the way to correction.
The Portuguese bailout.
Will be very helpful for Spain the reason is that those Spanish banks have a lot of exposure in Portugal.
Once the Portuguese situation was clarified was Portugal is rescued and it is on its way to dealing with -- economic reform problems.
That's gonna substantially improve the prospects for the Spanish banks -- I actually think this is going to be good news for Spain.
Well I I love your optimism -- but but I I am concerned because I was covering those riots in Greece and that affected markets here tremendously the markets I don't know if -- remember but the day of the worst riots markets here tag right -- -- 400 points.
And I'm wondering if things get out of control maybe it's good that that they're -- they're settling things over there but you may have popular discontent that royals are markets now.
I think two things are very different though.
-- -- hit over a year ago it was a big shock to the markets and there were lots of uncertainties as to how it would be handled.
The European Union did not help that.
Because they did there for three or four months before they got there their act together and did respond constructively but all through that period quite justifiably.
There was real concern as to whether Greece might default that might even cause problems with the -- there were huge anxieties now we know the routine.
The Europeans have gotten their act together they did it -- Greece they did it -- Ireland.
They're teed up to do with Portugal the money is it hand they've just strengthened in fact their financial facility and they'll be nailing that down tomorrow.
It's deja Vu all over again Portugal is -- a year later.
But without the eggs I -- With the mechanism in place with a clear work out procedure that I think the markets are fully experience with hope -- -- -- thing is got quite a while the other thing is.
The European economy is stronger now.
The European Central Bank is actually going to be raising interest rates.
That strengthens the Euro rather than we hit it -- that I think is the key market indicator that this is not gonna undermined by any means global financial markets.
All right Fred Bergsten director of the Peterson Institute.
For international economist so economics so good to be -- incidents -- thank you so much.
Filter by section