How will Europe be saved? That is the question that everyone may be asking themselves. Greece may receive a lifeline next week, but this is just another attempt for Greece to get her house in order. It is of this author's opinion, that it won't be the last time and this will continue to be play out throughout the year. According to public minister Christos Papoutsis, he states that the Greeks "can't take it any more".
What is also not helping is that the economic news out of Greece is still not a pretty picture. The Greece economy finished the year by contracting nearly 7%. With the steps that Greece are taken to satisfy this new agreement, it will no doubt continue to add downward pressure to the Greek economy. These steps won't be sufficient to meet her needs, and it won't delay the inevitable. In addition, it does not help that other Euro nations continue to contract at the same time that Greece is in middle of this firestorm; that in itself, is about to add flames to the fire across the Eurozone and perhaps the world.
So what then must be the next option for Greece and Europe?
There are some that say that Greece should default, and exit the Euro all together. If that approach is taken, you can bet we can see a global systematic risk being played out, and it will add fuel to the fire across Europe and the World.
What about an outside sovereign country? Who will that be? China - will you please stand up!
Chinese Premier Wen Jiabao made a statement on February 14:
"China is ready to get more deeply involved in participating in solving the European debt issue."
China has about $3.2 trillion worth of foreign exchange on hand. Recently, China has cut back on their exposure to the United States and increased their exposure to Latina America. There are some estimates out there that have China's exposure to be at 25% in Euro related assets. According to government reports, China's direct investment increased last year by 1.8% to $60 billion; it is also reported that China's investment in Europe has also increased by 94.1% in the past year.
So what does this mean for Europe?
Chinese Premier Wen recently made some comments about investments in Germany:
"We expect Chinese companies can make more investments and enhance cooperation with Germany. China encourages domestic companies of all types, including State-owned and private enterprises, to invest in Germany."
We know that China has an interest in Europe and is investing there. So what is the hold-up for China not to put the fire out? China has stated that they believe the Eurozone countries can solve their own problems, and will not continue to purchase their debt until they get their financial house in order.
Nevertheless, it is believed that China is going to take advantage of purchasing hard assets as sovereign nations are privatizing their industries. We can also see further action by companies selling their assets, as they are looking for a lifeline from outside foreign investors in order to survive this European recession.
Now that Europe has become the prime suspect for investment to buy depressed assets, we see heavy investment by China moving away from America and into Europe in 2012.
What impact will that have on the America's economy in 2012? A slowing economy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
