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Is the recession worse in Europe than the US?
By admin | July 29, 2008
Last weekend was expensive for US citizens, who now owe $2,666 more per head than they did last week, following Congress’s emergency weekend session to bail out Fannie Mae and Freddie Mac. (You can read that story here)
However, is Europe faring any better? According to the Daily Telegraph, the euroskeptic British organ of right wing populism, the recession in Europe will be worse than the Us. The recent Telegraph article focuses on the dire property market situation in Spain.
“The eurozone is tipping into a deeper downturn than America itself despite the tremors in the US mortgage industry, and may already be in full recession for the first time since the launch of the single currency.” That’s the view of Daily Telegraph journalist Ambrose Evans-Pritchard.
According to Evans-Pritchard, Spain is now spiralling into the “worst crisis since the Franco dictatorship.” “The economy is in dire straits,” said Dominic Bryant, Spain expert at BNP Paribas, quoted by the Telegraph.
Despite Spain’s house-building bubble (Over 10% of Spain’s economy has been building houses, more than 6-7% in the US according to the aticle) the good news is that Spanish banks have generally been prudent and avoided risky exposure to the mortgage market. Spanish banks, according to the Central Bank, have 200% doubtful assets coverage ratio, compared to the EU average of 60%.
Another group of banks that have been very conservative are the Andorran banks. According to Andorran financial consultants Walters Karrer, Andorran banks have no funds affected by the sub-prime crisis.
If you are looking for non-bank investments, right now I am recommending many clients to buy physical gold and store it in an offshore safe deposit box. For sure, at least diversify out of the dollar and the euro. The best way to do this is by opening a multi-currency account so you can switch currency online instantly with no hassles. More details on this and other offshore banking strategies are in The Q Practical Offshore Banking Guide 2008 which is available now for free download to Q Wealth members.
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