Quote of the Day:
…liabilities and controls go together…
Angela Merkel
Macro Overview
Squeaky Bum Time – Again
- One week to save the Euro, that’s what Italian Technocrat-Prime-Minister, Mario Monti, thinks. He is of course referring to the week which sandwiches the Euro G4 Summit (Spanish, Italian, German and French leaders) and the Eurozone Summit… so this week then. But we’ve heard this before. How many times has the Euro been on the brink of destruction? I’m getting “Eurogeddon Fatigue”. That’s a new one, isn’t it? I like it. Unfortunately I get the feeling I may be using that phrase for years to come.
- Still let’s just have a recap. This week Germany’s Chancellor Merkel had her back against the wall. Outnumbered 3 to 1 for those (men) against complete, stoic, dare I say it, Germanic, austerity and that (woman) for the austerity. But the Iron Lady did not disappoint she showed no apprehension at using the “c-word” … control. A lot of gestures towards collaboration, solidarity, a lot of smiles and handshakes… but underneath it all I feel the rhetoric getting slightly more spiky. Sigh… here we go again.
- But faced with the most powerful men in Europe, the Iron Lady held firm and put up a fight. One got the impression that the men from the South reeled away from the ring much more battered and bruised. Ironically, Merkel dismissed the meeting and went on to what Germany hammer Greece into the ground in the European Football Championships that evening. Images of her gleefully cheering each goal has caused a bit of a stir here in Europe!
- However, there is sign of Merkel ceding ground a little having arranged to meet Hollande on Wednesday and willing to talk more about a “growth pact” concurrent with the austerity measures.
- That said, with Merkel’s current line going down exceptionally well with the German electorate, I’m skeptical as to how this U-turn can be engineered without:
a) incurring more dept on sovereign balance sheets with highly stringent conditions to the effective creditors (i.e. Germany) causing wider political and social split within the Eurozone
b) significantly subordinating existing debt holders in Europe– causing wider financial and economic split in the market place. It would be a dangerous game to turn the entire European bond market into a retrospective CDO market. The ECB tried it in Greece, remember – the bond market got very squeamish.
Fighting Eurogeddon Fatigue
- Still, we have another summit to save the Euro coming up this week, there is a chance we see a huge step towards fiscal integration. This is the only way I see a line being drawn under the crisis. Which, of course, means the Northern European taxpayers putting their hands in their pockets – the only piece of the puzzle that is missing in Europe, as I implied back in 2011 in my piece: Short, Medium and Long Term Solutions to the Euro-crisis. European leaders have been obsessed with addressing the short term (ECB liquidity) and long term (structural treaty change) but the middle leg (direct financial contributions from taxpayers at the core of some other form of balance transfer) is missing.
- It’ll be interesting to hear what comes out of Merkel and (perhaps more importantly) Hollande’s mouth come Wednesday night – they’ll surely use this time as a testing ground for any significant announcements. But I’m keeping this comment short and sweet, you’ll have to forgive me… this weekend I have a severe bout of Eurogeddon Fatigue.
- I’ll leave you with a RT interview of Roubini
Market Overview
Positive Charts!
- I have a wedding to go to today so I’ll keep this short.
- I’m just going to show you (for a change!) two positive charts.
- The first one isJapan’s small-cap index JASDAQ… nice.
- The second on is Visa stock performance over the last 12 months… up 70%…. nice.
Chart of the Day
Chart of the Day #1: JASDAQ
Jasdaq (Source: Bloomberg)
Chart of the Day #2: Visa
Visa (Source: Bloomberg)
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Tags: Austerity, Economic Growth, Economy, Euro, Europe, Eurozone, France, Francois Hollande, Germany, Greece, Italy, Macroeconomic News, Mario Monti, Merkel, PIIGS, Politics, Spain, TIPSTER
Michael Kudrna
