The Great Debate UK

Will the euro survive Europe’s latest sovereign debt crisis?

IRELAND/Kathleen Brooks is research director at forex.com. The opinions expressed are her own.

Ireland’s banking crisis reached boiling point this week. The Irish authorities are still adamant the country doesn’t need a bailout and are trying to draw a distinction between a sovereign bailout (which Irish Prime Minister Brian Cowen, Finance Minister Brian Lenihan et al claim they don’t need) and banking sector support (which they most definitely do).

Regardless of the semantics, it seems highly likely that Ireland will receive funds from the EU and the IMF possibly by the end of the week. With Ireland likely to be the second member of the Eurozone to require financial assistance in six months, it brings into question the “no bailout” clause in the European Union treaty.

2010 has been the year when Europe’s grand project was fundamentally altered, but where does this leave its most precious commodity – the euro?

Thank you, Gordon Brown

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BRITAIN-INFLATION/–Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.–

If the economics profession has sunk in public estimation in the last two or three years, it would hardly be surprising. Our failure to predict the crisis is something which cannot be simply brushed aside lightly, as some of my colleagues would love to do.

What is the extent of Ireland’s crisis?

- Kathleen Brooks is research director at forex.com. The opinions expressed are her own. -

The euro’s resilience in the third quarter has been astonishing. Since reaching a low against the dollar in June, the single currency has appreciated by an impressive 14 percent. This has coincided with the Irish financial crisis reaching boiling point, culminating in the announcement on Thursday by the Irish authorities of the final bill for winding down Anglo Irish Bank.

from Felix Salmon:

The European crisis gets quietly worse

Edward Hugh has a must-read overview of the euro crisis as it stands right now: not nearly as panicked as when everybody was concentrated on Greece back in May, yet in many ways worse than that.

Greece still seems certain to default sooner or later, and its bonds are trading at levels very near to those seen in May. Spain has improved a bit -- but that tiny improvement seems to have been accompanied by a significant rise in complacency on the part of the government, so it's unlikely to last long. And both Ireland and Portugal have deteriorated significantly.

from Felix Salmon:

Why Ireland is bailing out foreign banks

Robert Peston has a theory for why Ireland can't bail in the sophisticated institutions which lent untold billions to the country's beleaguered banks:

Take a look at the latest figures from the central bankers' bank, the Bank for International Settlements, on just the exposure of overseas banks to Ireland (in other words, credit provided by pension funds, hedge funds and wealthy individuals would be on top of this).

from Felix Salmon:

When secret meetings are boring and useless

The WSJ has a great little story proving once and for all that just because something is secret doesn't mean it's interesting. Apparently, for a year or so, a "secret task force" met at ungodly hours on the sidelines of various euro-events in cities like Brussels and Luxembourg. Its members were hand-picked, its task momentous: to come up with a plan should a eurozone country enter a crisis and threaten the currency union.

But it achieved, to a first approximation, exactly nothing, beyond simply keeping its own existence a secret. (If the markets had found out that the committee existed, they would probably have taken it as a sign of weakness and worry on the part of the Europeans, and increased pressure on the likes of Greece.) By the time that the Greek crisis flowered, there was no plan at all, and ultimately the European bailout had to be hammered out at summit level, mainly between Nicolas Sarkozy and Angela Merkel.

“Impossible” balancing act to perform with stress tests

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-Tiffany Burk is the European Market Analyst at Travelex Global Business Payments. The opinions expressed are her own.-

Commentators have suggested that the hype surrounding the release of the EU bank stress tests has made it feel more like a PR campaign than a credible financial analysis.

from Global Investing:

What fund managers think

Bank of America-Merrill Lynch's monthly poll of around 200 fund managers had a few nuggets in the June version, aside from the usual mood-taking.

Gold is too expensive.  A net 27 percent of respondent thought it overvalued, up from 13 percent in May. Then again, the respondents to this poll have reckoned gold is too pricey since September 2009.

False dawn or risk recovery?

-Jane Foley is research director at Forex.com. The opinions expressed are her own.-

What began at the start of the year with an acknowledgement from Greece that it had been living way beyond its means soon turned into a more universal re-appraisal of the risks of sovereign default.

The EU and the hedge funds: the vendetta goes on

You might have thought that, with the Eurozone in turmoil, the EU would have its hands too full to pursue its vendetta against hedge funds.

Far from it, the latest proposals are even more wide-ranging than most observers anticipated, involving the establishment of a Europe-wide regulatory authority with the power (presumably) to dictate to the FSA how to police the UK financial sector, restricting the ability of hedge-funds based outside Europe to sell inside Europe and making it hard for European investors to invest in the rest of the world’s so-called alternative investment vehicles.

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