Euro Zone Crisis: "This Ends Through War"

Posted by Brianna Panzica  on the Wealth Wire 

The euro zone’s financial gloom has extended into another year.

As European nations like Spain, Portugal, and Greece attempt to fight their way out of the dark, analysts are less than optimistic about the year ahead. The financial crisis is as deep as ever, and slow reform and a lack of direction will continue to exacerbate the situation.

The Euro Zone

Credit: Wikipedia

2012 was filled with predictions of which nation would be the first to break away from the euro – and Greece often had the most votes. But even though every nation struggled to hold onto the currency, it’s still not safe in 2013.

Economist Charles Robertson of London-based Renaissance Capital believes Greece will finally be the first to exit the euro zone this year, but it won’t be the last. Spain might be the next in line, dropping the currency as early as 2014.

But hedge fund manager Kyle Bass is even more pessimistic for the fate of Europe. He believes nothing short of war will solve the problem.

From Reuters:

“This ends through war,” Bass, the founder of Hayman Capital Management in Dallas, said. “I don’t know who’s going to fight who, but I’m fairly certain that in the next few years you will see wars erupt, and not just small ones,” he told a recent conference.

His predictions, of course, are particularly extreme. War would be a last resort situation, and even if the possibility presented itself, the European Union would likely do everything in its power to prevent it.

But it does highlight the depth of the problem in Europe. Spain, for example, has more problems than just its 25% unemployment rate.

The government estimates Spain’s Social Security System has a deficit of €3 billion, or $3.9 billion. With so many people out of work – particularly the younger generations, significantly fewer people are paying into the program. And the government is taking money out.

From ZeroHedge:

As the WSJ notes, Spain has been quietly tapping the country’s richest piggy bank, the Social Security Reserve Fund, as a buyer of last resort for Spanish government bonds – with at least 90% of the €65 billion ($85.7 billion) fund has been invested in increasingly risky Spanish debt.

The government is continuing to draw more funds from the reserve, this November passing the annual legal limit and thus raising the cap.

And it’s leaving many wondering if pension benefits will run out in the very near future.