Is it time to invest in a Euro Zone recovery? Things have been looking pretty dismal in the Euro Zone for the last couple of years. Leaders have been scrambling to bail out nations across its Southern tier, Greece, Spain, Portugal, and Italy, as well as Ireland. The worst of the lot was Greece. Then, finally, Euro Zone and Greek leaders agreed to a bailout deal in which the nation would receive the equivalent of $300 Billion to cover national debt bonds that are coming due. Everyone heaved a big sigh of relief. Everyone except the Greek people, that is. While investors thought that it might again be a good time to invest in a Euro Zone recovery Greece thought differently. The response of the Greek voters in the most recent election was to vote for a variety of political parties, all with different views on the bailout. This sent the nation into a second election and led investors, Forex traders, and the like to believe that a Greek financial collapse would result in Greece exiting the Euro Zone.
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Austerity measures were agreed to by Euro Zone members with the intent of reducing national debts. However, these same measures have been a significant drag on economies across the continent. Spain, for example, has a twenty-five percent unemployment rate and Greece has never come out of the 2008 recession. Voters in France brought a socialist into power as we noted in our article, Return to Socialism in Europe Drives Stocks Down . Times certainly did not seem right for investors to invest in a Euro Zone recovery. Then the Greek people voted in their second election in a month. When things have been looking their worst Greece elected enough legislators from “pro bailout” parties to form a legislative majority. What this means for Greece is that it will likely stay in the European Union and deal with the various austerity measures required for its bailout funds. What it means for the Euro Zone, the Euro, and the world economy is that the much feared domino effect of financial collapse in Greece followed by Spain, Portugal, and then Italy has been forestalled. For those to subscribe to the well-known blood in the streets view of investing this might be the time to recognize that things may well have been at their worst and may be on their way to recovery. If that is the case where does an investor look to invest in a Euro Zone recovery?
We recently suggested that one might invest in Euro Zone junk bonds . Nations along the Southern tier of Europe are paying significantly higher rates of interest than what Germany pays to borrow money. If, in fact, the Euro Zone is going to pull though, interest rates will fall and investors will reap healthy profits from investments in bonds. If you are considering investing in Euro Zone stocks there are a large number of strong companies to consider. Many have been unfairly devalued due to the current economic crisis. Do diligent fundamental analysis of multinational companies like Siemens and Roche Pharmaceuticals and reap the rewards of things coming back together in Europe as you invest in a Euro Zone recovery. As always do your own analysis and consider this article as food for thought and not direct investment advice.