Realists watching the events in Europe over the last few years accepts that there is at least a small risk of the whole thing falling apart. (Some will say “I told you so,” but it remains a most distressing turn of events.)
Yet instead of the usual talk of entire countries withdrawing from the euro, we are increasingly faced with the prospect of individual countries splintering along regional lines. Continue Reading
Weeks ago Angela Merkel said that she might not attend the Euro Cup soccer championship. While she’s a big football fan and knows that the German team might do quite well, she didn’t want to endorse the Ukraine’s treatment of Yuliya Tymoshenko. Quite right she was, too.
But now it turns out that Germany will play Greece on Friday in the Euro Cup tournament’s semi-final. So Merkel should now reverse her decision. She should go and take the opportunity to reset Germany’s dialogue with Greece. Continue Reading
The most interesting news out of Greece this weekend was not the result of the parliamentary elections. No, much more interesting is the news that Greece will play Germany in the quarterfinals of the Euro Cup soccer tournament on Friday. This will be one to watch.
But why were the Greek elections such a letdown? Well, after weeks of build-up we now have a parliamentary situation in Greece that looks…exactly like the situation that led to this latest round of voting in the first place. It’s called gridlock. Continue Reading
Will Greece leave the euro? A SoberLook reminds us of a good barometer of market sentiment: Intrade futures. At last look ( the prediction market showed a 61% chance that “a” country could leave. What do other markets say? Let’s look at two key indicators.
Foreign exchange, the largest, most liquid of all financial markets is giving a thumbs-down.The strength of the euro had defied its many skeptics, but it’s now at the lowest it has been since January. At last look it was trading in the mid-$1.2820s. Find the latest charts here.
2) German multi-nationals
You can see the recent weakness of the Xetra Dax here.
And here’s some technical commentary on its next moves. Under normal circumstances German exporters would love a lower euro, but these are not normal circumstances. If Greece leaves, will more of the periphery countries follow and leave only a core of Germany, Finland (and the Netherlands?) behind? If this core managed to get past the initial negative market reaction to these exits, a “new Deutschemark” could rise to reflect its stronger current account position. This would be bad news for exporters.
But as this, and the whole financial crisis has shown, politicians and other leaders are the wildcard. The Wall Street Journal has this take from prominent currency analyst, Marc Chandler of Brown Brothers Harriman:
“The market is beginning to move as if we are at the edge of the abyss, and in the past, as we’ve gotten closer to the edge, policy makers have done something to pull us back,” Mr. Chandler said.
“the CIO unit owned a variety of investments, including European assets. If the group becomes more conservative, it could move to sell these other holdings, putting pressure on those markets, too.”
It would be a particularly bad time for JPM to embark on a fire-sale of European assets. To do so would say a heckuva lot about how worried JPM is about its poorly executed “spledge”.
- Related story: The eurozone X-factor
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Whatever one thinks about Lord Wolfson’s euro-skeptical meddling, it certainly has been entertaining. The British baron’s offer of a £250,000 prize for the best ideas to deal with a possible breakup of the eurozone has brought all sorts of people out of the woodwork. (Including this precocious 11-year old.) But one of the most fascinating ideas on the shortlist has come from Neil Record — although I’m not sure that my takeaway was his main intent. Continue Reading