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Confidence Plunges In Europe

By Kathy Lien
23 June 2005 22:19 GMT
With Italy leading the pack with rallies and demonstrations for the return of the Lira, Italians must be either very angry about the Euro or uneasy about what re-introduction of the Lira would mean.  There is a great article by Morgan Stanley that says that in order for Italy to be as competitive as they were before the euro, they would have to devalue their currency by 25%.  Yet, with such a high debt to GDP ratio and multiple downgrades by rating agencies, a devaluation of the euro would send Italy’s debt services cost skyrocketing, which would inevitably lead to yet another downgrade or in the worse case, even a default by Italy on their debt.   With such a dismal future in mind, Italian consumer confidence fell from 104.3 in May to 102.9.  Following the recent referendum, Dutch producer and consumer confidence also fell in June. 

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23 June 2005 22:19 GMT