Europe Grapples with Debt Crisis to Find Solution

October 27 00:00 2011

New York, October 26 ( – The debt inferno had all the European leaders rising to the challenge. Their July 21 summit was hailed as a “historic turning point” by French President Nikolas Sarkozy and Luxembourg Prime Minister Jean- Claude Juncker called it the “final package, of course.” But the deal fizzled out even as the leaders returned from a vacation.

The European bigwigs will be back in action today as they meet in Brussels in an emergency summit to find a viable solution to eradicate what U.S. Treasury Secretary Timothy F. Geithner called the “catastrophic risk” of the debt crisis. The biggest threat to the global economy is from a potential Greek default that would send shockwaves jolting the banking system.

A rather negative outlook was presented by Barry Eichengreen, an economics professor at the University of California at Berkeley when he said, “Buck up, this crisis is going to be with us still for a while. I fear they’re not going to take the kind of steps to resolve it.”

Asian markets got wind of the shockwaves when it declined for the first day in four ahead of the meeting. The MSCI Asia Pacific Index dropped 0.7 percent at 12:25 p.m. in Tokyo and the yen maintained its gains after rising to a post-World War II record versus the dollar yesterday. The Markit iTraxx Asia index of debt default risk went up eight basis points. Oil slid 0.2 percent.