The Great Debate UK

Sovereign default risk, fact or fiction?

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

If a gauge is needed to measure how concerned investors are at about sovereign default risk, we need look no further than the price of gold which has made fresh all time highs this week.

Assets with intrinsic value are in demand.

U.S. Treasury debt has also fared well on the back of safe haven buying over recent weeks; it is possible that the dollar could be entering into a renewed period of broad based strength as a consequence of risk aversion.

However, the solid demand for U.S. debt has not prevented the US authorities being wary about the risk of contagion from the European fiscal crisis;  after all the US budget deficit may hit 11 percent of GDP this year which is not too far behind that of Greece (at 13.6 percent).

German elections bring forward a possible stalemate situation for EMU

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

Next month’s UK general election is not the only one of significance in Europe. There is the possibility that the German regional elections in North Rhine-Westphalia on May 9 could result in the end of the CDU/FDP government’s majority in the upper house of parliament.

Subject of Europe set to trip Liberal Democrat Nick Clegg

Photo

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

Over the past week the British electorate has taken a shine to Liberal Democrat leader Nick Clegg.

from MacroScope:

Brit shock horror: euro to survive

Euro brezinys_EC1

Britons have never really got the euro zone. "Its not really going to happen, is it?" was a typical question from a City analyst to Reuters back in the mid-90s. The political drive behind the creation of the monetary union was beyond many in eurosceptic Britain.

So the results of a straw poll at an event sponsored by independent City advisers Lombard Street Research were somewhat suprising.  A hundred or so mainly British investors were asked whether the euro would be around in five years with its current membership. Response was about 80 percent saying yes to 20 percent saying no.

from The Great Debate:

Embrace reality, not fight speculation

Stock up on canned goods, the authorities appear to be opening a new front in the War Against Speculation; this time taking aim at the people who might profit from Greece and its European partners' woes.

Just days after the U.S. Securities and Exchange Commission voted new limits on short selling, Germany is investigating the credit default swap trading of speculators to try to prevent them from profiting from any bailout of Greece.

An alternative view of the crisis in Greece

Photo

Mark Bolsom1-150x150.jpg-Mark Bolsom is the Head of the UK Trading Desk at Travelex, the world’s largest non-bank FX payments specialist. The opinions expressed are his own.-

Greece has been dominating the headlines lately with many commentators heavily criticising its burgeoning deficits and perceived threat to eurozone stability. But is such heavy criticism really justified, or are the Greeks simply being made scapegoats for systematic failings? After all, Greece did not cause the current financial crisis, but is instead one of the major victims.

Is a queue forming at the EU’s fiscal soup kitchen?

Photo

copelandl- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -

Back in the prehistory of the euro zone, I wrote an article in the Times trying to work out how the game currently being played out in Europe would end.

from MacroScope:

Political economy and the euro

The reality of  'political economy'  is something that irritates many economists -- the "purists", if you like. The political element is impossible to model;  it often flies in the face of  textbook economics;  and democratic decision-making and backroom horse trading can be notoriously difficult to predict and painfully slow.  And political economy is all pervasive in 2010 -- Barack Obama's proposals to rein in the banks is rooted in public outrage; reading China's monetary and currency policies is like Kremlinology; capital curbs being introduced in Brazil and elsewhere aim to prevent market overshoot; and British budgetary policies are becoming the political football ahead of this spring's UK election. The list is long, the outcomes uncertain, the market risk high.

But nowhere is this more apparent than in well-worn arguments over the validity and future of Europe's single currency -- the new milennium's posterchild for political economy.

from MacroScope:

The euro gets a warning shot of Greek fire

Juergen Stark , Germany's ECB executive board member, is well known as a true believer in tight fiscal discipline, so his reported comments in Italy's Il Sole 24 Ore about not bailing Greece out of its financial difficulties are not out of character. But the market reaction must have at least given pause for thought to EU leaders wondering how far to go in coddling their wayward child.

Within moments of Stark's reported musings that markets were "deluding themselves" if they thought member states would "put their hands in their wallets to save Greece", hitting the foreign exchange rooms, the euro was on a tumble.  It hit a low of $1.4285 from a day's high of $1.4371 -- which doesn't sound like a lot, but is, especially over a very short period of time.

from The Great Debate:

Global rebalancing to weaken dollar, quietly

-- Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own --forex

Twenty-four years ago, major nations called for depreciation of the dollar to rebalance the global economy. Now, as another effort at rebalancing looms, the dollar will again bear the brunt -- though officials will try to ensure its fall is less dramatic this time.

  •