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By Jason Stipp | 11-04-2011 11:00 AM

Making Matters Worse in Europe

Concerns over Greek government turmoil, Italian debt, the ECB's mandate, and the sturdiness of the EFSF are complicating plans for a bailout, says Morningstar markets editor Jeremy Glaser.

Jason Stipp: I'm Jason Stipp from Morningstar, and welcome to the Friday Five.

You'd have to been on spelunking expedition over the last few weeks to not have seen or felt the impact that Europe has had on the markets. It's been all Europe, all the time.

Here with me to offer some details on the current situation is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for being here.

Jeremy Glaser: Jason, sometimes I wish I could crawl into a cave when some of this is going on, but it's certainly been an eventful week.

Stipp: So, what do you have for the Friday Five this week?

Glaser: Well, this week, we're really going to focus in on Europe and talk about Greece's referendum, the European Central Bank, about Italy, about Eurozone manufacturing and growth, and finally about the EFSF.

Stipp: So, there were some ups and downs and some turmoil over this referendum in Greece. What was the referendum? And is it going to happen? And what's the impact?

Glaser: Well, out of nowhere earlier this week, the Greek prime minister came out and said that they're going to put to a vote of the Greek people if they should participate in this bailout process, if they should go through these extra austerity measures in order to get the next tranches of aid and to accept the write-down of the Greek government debt.

And this just really roiled world markets. People really weren't expecting this to happen. They figured that this was basically a done deal, had been carefully negotiated, and that they'd been busy kind of crossing the T's and dotting the I's, and this just comes out of nowhere.

Then we hear the referendum is off, then it's back on again. Now, it's off again. And I think, certainly, it just shows how bad the political turmoil is in Greece right now, that the government doesn't have a huge majority in Parliament. They don't enjoy a lot of broad popular support. The bailout and a lot of these austerity measures are very unpopular with the Greek people. You see the general strikes. You see people being really upset about this. And when you see the referendums coming and going, and you just don't know which way is up, it doesn't give a lot of confidence that Greece will be able to actually implement these measures that will allow the plan to go through and allow the plan to be implemented as it was.

For the first time, we heard Angela Merkel and Nicolas Sarkozy talk about the fact that Greece may have to leave the Eurozone, and maybe will choose or maybe forced to leave the Eurozone. That's something they've never mentioned before. I think, even them just talking about it really raises the question of, even if we don't have this referendum, is it too late for the Greek political system to really come together to implement these reforms?

Stipp: On Thursday, we had a surprise move by the ECB. They cut interest rates. What's going to be the impact of this? And is it really going to be enough to do anything?

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