The second most important external factor for the Mexican economic outlook is the evolution of the eurozone. The European Monetary Union continues to face significant challenges stemming from a negative feedback loop between bank fragilities and fiscal weaknesses. These struggles are a consequence of a long period of rising indebtedness on the part of the private and public sectors, especially in the peripheral countries.
Some subprime borrowers with ARMs, who may have counted on refinancing before their payments rose, may not have had enough home equity to qualify for a new loan given the sluggishness in house prices.