Why did european stocks fall after the sovereign debt crisis?

Could someone explain to me (macroeconomic theories) why the europeans stocks fell and the euro depreciated after the debt crisis in italy?





Thanks in advance!|||I am no economist but let me give you a logical answer





EU is a group of countries including italy (lets say just like a family with 12 earning members) and then italy has debt crisis (job of a family member is gone) then what will happen to the family?|||Supply and Demand



Sovereign debt is the basis of interest rates for lending in a given country. As required yields on sovereign bonds go up, lending freezes and economic growth comes to a halt. Sovereign debt defaults also act very similarly to a currency crisis (look up Thailand currency crisis in the 90's).



This causes demand for stocks to drop as nobody wants to buy and supply to increase as everyone bails out, with the net effect being a broad stock market crash.|||To enrich themselves even further, the global plutocrats have ordered the govts w/ debt probs to inflict austerity policies on their working people so the money that govts would spend on the ppL is diverted to the plutocrats.





Austerity usually creates hi unemploy and that pulls a lota $ out of the econ bc the workers wont be able to spend much, so manufacturers produce less and the GDP falls, usually pulling down the stock markets with it.





The plutocrats take the money the govts diverted to em and use it to speculate in global bubbles in commodities, natural resources, real estate and currency.





The boom %26amp; bust cycle of the bubbles often destablize economies and the too-big-to-fail entities of the plutocrats demand the govts rush in w/ yet MORE bailout money for them.





So the govts get deeper in debt and are therefore more vulnerable to the demands of the plutocrats and their political puppets who will demand that the plutocrats' class enemy, the working people, be made to sacrifice EVEN MORE in giving up health care, pensions, unemployment compensation, workplace safety regulations, etc etc.





Since the plutocrats have weakened regulations EVEN FARTHER, they have more power to create and profiteer from speculative bubbles and pay even less in taxes so there's less money for workers' compensation, enforcement of workplace safety regulations, etc.





And the cycle of the vast enrichment of the plutocratgs continues and their class enemy, working ppL, are pushed deeper into share-cropper status and must work for far less compensation.





===============








International Monetary Fund’s former Chief Economist:





“Our leading bankers looted [the United States], plunged the world into deep recession, and cost the United States eight million jobs.





“Now many of them stand by with sharpened knives and enhanced bonuses – willing to suggest how the salaries and jobs of others can be further cut.





“Consider the morality of that.





“Will no one think hard about what this means for our budget and our political system until it is too late?”





By Simon Johnson, former Chief Economist @ the International Monetary Fund.





http://economix.blogs.nytimes.com/2010/1…





http://economix.blogs.nytimes.com/2011/0… Simon Johnson


--------------------





Hedge-fund boss John Paulson [no relation to Henry, former Treas Sec] “personally netted more than $5 billion in profits in 2010, trumping the nearly $4 billion he made in 2007 shorting subprime mortgages.”


Wall St Journal. http://online.wsj.com/article/SB10001424…


------------------








. . “Wall St is destroying the country.” . .





Rich investor blasts Wall St after winning $48 million from CitiGroup-Smith Barney in arbitration.





He also won an addition $15,000,000 in puntive damages against them, plus $6 mil in adjusted damages, and $3 mil in legal fees.





"Instead of the financial world being the lubricant for business, they’r manufacturing products with no utility whatsoever except for generating fees,” the investor, Mr Hosier said.


Wachovia-Wells Fargo recently settled similar cases.





“Somebody’s got to do something about Wall Street. It is destroying the country."


http://www.nytimes.com/2011/04/24/busine…


----------------








“At the height of the borrowing binge in 1994, the World Bank reported glowingly on Thailand:





" ‘Thailand provides an excellent example of the dividends to be obtained through outward orientation,





“receptivity to foreign investment, and a





“market-friendly philosophy





“backed up by conservative macro-economic management and cautious external borrowing policies.’ "





By early 1997, Thailand was effectively bankrupt due to its foreign debt level even before its currency collapsed. It was first domino to fall in the 1997 East Asian Financial Crisis.





The International Monetary Fund stepped in w/ a $20 billion rescue package for the nation in July-Aug, 1997.


http://www.ifg.org/analysis/imf/waldente…


. .


http://en.wikipedia.org/wiki/1997_Asian_… Thai bankruptcy %26amp; IMF bailout, July, 1997.


------------------