ETF To Profit As Eurozone Repeats 2009 Financial Crisis [Vanguard FTSE Europe ETF, iShares S&P Europe 350 Index (ETF)]

europeMoe Zulfiqar: When troubles first started in the eurozone years ago, they stemmed from the credit market. The amount of bad loans increased and as a result, banks needed to be bailed out. Greece and Ireland were the first in the eurozone to come under scrutiny, followed by Spain and Portugal; concerns later grew over whether Italy needed a bailout, as well. In 2012 and 2013, we saw a little calm in the eurozone. One of the main factors behind this was the European Central Bank (ECB). It said it will do whatever it takes to save the eurozone. This sent a wave of optimism through the global economy.

Now, we are starting to hear the problems—bad loans—remain in the common currency region…and they’re increasing.

The Bank of Spain’s data showed that bad loans in the country grew to a record-high in November. They stood at 13.08% then, compared to 12.99% just a month earlier. Month-over-month, bad loans in the fourth-biggest eurozone economy grew by 1.5 billion euros. (Source: “CORRECTED-Spain’s bad loans ratio reaches new record high at 13.08 pct in Nov,” Reuters, January 17, 2014.)

This isn’t all for Spain. Recently, after posting a loss in its fourth quarter, the Banco Popular S.A.—the biggest bank in Spain—said that at the end of 2013, 6.8% of all loans at the bank were 90 days overdue. In 2012, this rate was 5.1%. (Source: Neumann, J., “Spanish Banks Still Battling Bad Loans,” Wall Street Journal, January 31, 2014.)

Banks in Italy—the third-biggest economy in the eurozone—are going through something similar. Standard & Poor’s expects bad loans at the Italian banks to increase to 310 billion–320 billion euros by the end of 2014. This would be similar to 18% of all loans. (Source: “Full recovery a long way off for Italian banks -S&P,” Reuters, January 21, 2014.)

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