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7/29/11

A U.S. Default Could Benefit Euro Markets, But Don’t Bet on It - by Geoffrey T. Smith

There are some scenarios under which you could argue that a U.S. default would have some benefits for European markets.

For example, a good part of the trillions invested in U.S. Treasurys is there simply because of their supposedly risk-free nature: surely some of it would migrate to the remaining AAA credits in Europe if the U.S. were to be downgraded?

Also, would a default by the U.S., or even a downgrade, not lead people to revise their opinion that the U.S.’s debt is safer than euro-zone debt because it has a better-functioning political system, with a clearer system of fiscal rights and obligations?

For more: A U.S. Default Could Benefit Euro Markets, But Don’t Bet on It - The Source - WSJ

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