Miguel Marina, an unemployed Spanish man, counts sold ballots inside his home in Ciempozuelos, near Madrid, May 27, 2008. Marina is selling raffle tickets in a bid to get rid of his 320,000-euro apartment near Madrid because he is unable to keep up with his mortgage payments and cannot sell it. Miguel Marina said he hopes to be able to pay off his mortgage, worth 80 percent of the value of his property, by selling 64,000 tickets at 5 euros each, promising his home as the single prize to the winner of a draw.
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Moody’s Assesses Crisis Risk in Europe
Several years of deficit on the current account of the balance of payments and the steady growth of crediting have brought 11 European countries to the brink of crisis. If the situation develops negatively, the countries, which are mostly in Eastern Europe, will have to turn to emergency refinancing of their debts, which amount to 2-30 percent of the GDPs. That possibility is discussed in a report published today by Moody’s rating agency. The agency defined its risk group as those countries with a negative balance of payments for the last three years and that increased their ratio of crediting to GDP by more than 10 percent in the last five years.
The threat the agency sees on the horizon for those countries is a fast and difficult correction after a lengthy period of rapid economic growth. Thai is usually accompanied by reductions in the GDP, investments and consumption and problems in the financial sector, also often devaluation of the national currency. Governments then have to deal with at least three unpleasantnesses: reduced budget income leads to a high budget deficit, expenditures grow because of the need to support the banking system and stability in the financial sphere, and the national debt expressed in the national currency after its devaluation will grow due to the revaluation of those parts of it that are in foreign currencies.
The governments and economies of the countries in the risk group are preparing for the coming for the coming perturbation in various ways. Kazakhstan, Spain, Estonia and Bulgaria have maintained a budget surplus for a number of years. If they are hot with a crisis, it will not be disastrously. Hungary, Latvia and Lithuania are in the most difficult situation. The governments there may not have the means to stave off a crash. Their ratings could be lowered and their economic development set back several years. Moody’s does not make a detailed prediction of the possible events, but it noted that, in many of the countries, real estate has increased in price so much in recent years that a bubble can be suspected. Russia is among those countries. Russia does not belong to the risk group, however, since it has a positive trade balance. With current oil prices, the trade balance may stay positive through 2010.
www.kommersant.com
All the Article in Russian as of May 29, 2008
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