Rob's third post on the scramble to save the Euro
Down, down, deeper and down.
What are they doing?
The Euro zone ministers have cancelled the meeting scheduled for 13th October to ratify the next tranche of the agreed bail out package on the basis that Greece will not meet it's deficit target, and as a result they may not now get the money until the end of November.
Greece has already said that they need the money by mid-October or they run the risk of defaulting on their debt repayments so what are they playing at? Jean-Claude Juncker, the chairman of the Euro group managing this project thinks that Greece will be able to weather the storm until mid-November – well that makes it alright then I suppose.
Finland has threatened to block any new bailouts unless they receive collateral to back up any loans they might make – seems like a good idea to me, surprised that nobody else has thought to ask.
As you may have gathered, I am a cynical about anything these guys say and do – are they forcing a default on Greece, but without taking any responsibility for it – just a bad timing issue?
Word on the street is that this is the preferred German option, but you won't see that officially quoted by them. Add to all this the fact that Dexia may have to be broken up to prevent a failure, then things in "Euroland" are not looking too healthy.
The lack of positive action, one way or the other is the major cause of the market's despondency – again I say that if they positively cut Greece off and get the default out of the way, the market would breathe a sigh of relief and get back to business – the uncertainty is creating more problems than anything else.
Stock markets down again – FTSE down around another 2%, through the psychological 5,000 barrier trading at 4,900.
Stock markets down again – FTSE down around another 2%, through the psychological 5,000 barrier trading at 4,900.
Euro/$ down to 1.31, dragging GBP with it – GBP/$ trading at 1.54. However GBP is still holding out against the Euro and trading higher at 1.17.
It is not surprising therefore that there are strong calls from within the UK Tory party itself on a referendum on Europe – I am not 100% sure that the UK would benefit by being outside of Europe completely, but I would advocate redefining the relationship, and possibly reverting to the original concept of a managed trading block like NAFTA, rather than a Federal States of Europe, which is the way France and Germany have tried to push it.
It is all looking very, very messy.
A "kill or cure" decision is needed by the core Euro zone nations; further delays will just exacerbate the problem.
Bear in mind that a debt ridden, economically frozen Europe will affect you (and the UK as a whole) as well, and not in a good way – pray for positive action
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The author, Rob (not his real name) is a treasury manager at one of UK's largest charities, he was formerly a trader.
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