Richard DeKaser: European debt crisis
U.S. President Barack Obama arrives on the first day of the NATO Summit at Feira Internacional de Lisboa (FIL) on November 19, 2010 in Lisbon, Portugal. The two day summit will address issues including a new strategic concept for NATO. Britain and the US will also seek an agreement to hand over responsibility for security in Afghanistan to local forces over the next four years.
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JEREMY HOBSON: Now let's get to the debt crisis in Europe. Richard DeKaser is an economist with the Parthenon Group. And he's with us live from London this morning. Hi Richard.
RICHARD DEKASER: Good morning Jeremy.
HOBSON: So bring us up to date on the news from Portugal and why it matters.
DEKASER: The government brought to market $1.6 billion in debt. And it was all snapped up, and it was snapped up at interest rates which were not as high as people feared they might have been. Now why this matters is that like Greece and Ireland before it, Portugal has been the latest focus of investors who are pessimistic that it can make good on its debts going forward. And as a result, they have been unwilling to buy their debt in large volumes. So the question here was, will they pony up and actually buy the necessary debt to show that there's confidence and keep Portugal out of the bailout category.
HOBSON: Richard, I feel like I have whiplash here with the European debt crisis. Everyday there's one step, one step back. What do you think will happen going forward and does the European debt crisis still have the ability to draw us back into recession?
DEKASER: It does have the ability, but I don't think it's likely. And the reason Jeremy is the real risk here is default. Believe it or not, no country has yet to default on its debt. Neither Ireland nor Greece before it. And the reason is that the bailouts have been there. And number one the governments of China and Japan have expressed a desire to buy this debt, European governments ponied up hundreds of billions to do it, and the countries themselves are taking all the tough fiscal steps to prevent those problems from coming to a head.
HOBSON: Richard DeKaser, economist with the Parthenon Group. Thanks so much for your time.
DEKASER: My pleasure.