Citywire for Financial Professionals
Stay connected:

View the article online at http://citywire.co.uk/money/article/a594805

Week Ahead: hankering for a volatility-ending master plan

Our preview of the big financial events in the coming week.

 
Week Ahead: hankering for a volatility-ending master plan

If – as reported by Reuters – Spain formally requests eurozone bank aid on Saturday, what then?

That would make Spain the fourth eurozone country to seek assistance, and would come ahead of an International Monetary Fund audit of Spain’s banks, which is due on Monday.

But a banking bailout, say some analysts, could necessitate further aid to deal with Spain’s public finances as investors put increasing pressure on the country.

And it wouldn't after all be the overriding, all-encompassing eurozone master plan that investors crave.

In the past week monetary authorities around the world have delivered disappointments. The European Central Bank left the door open for a future rate cut, but ECB chief Mario Draghi called on politicians to act instead. In the US Federal Reserve chairman Ben Bernanke again floated the idea of more monetary support, but was vague and markets ultimately gave his comments the thumbs down. Nor did the Bank of England act.

Only China took serious measures in the past week, but investors fear rate cuts there only herald poor economic data this weekend.

What investors want is the wholesale banking and fiscal union that will involve so much compromise from those eurozone nations that are reluctant to give up any sovereignty.

A German government official summed up Europe’s dilemma last week: ‘The fundamental question is relatively simple. Do our partners really want more Europe, or do they just want more German money?’

This dilemma is epitomised by this week’s front cover of the Economist, showing a sinking ship called ‘The World Economy’ with a question bubble: ‘Please can we start the engines now, Mrs Merkel?’

The German leader has in the last week herself said that she was poised to take action. ‘It is important to stress again that we have created the instruments for support in the eurozone and that Germany is ready to use these instruments whenever it may prove necessary.’

Beyond a Spanish banking plan, hopes lie with an EU summit at the end of June. But even that may not yield the results that are hoped for.

‘I don't believe that there will be one single summit that will decide on a big bang,’ Merkel said, according to a separate report. ‘But what we have been doing for some time, and on which a working plan will certainly be presented in June, is to say we need more Europe.’

Sign in / register to view full article on one page

3 comments so far. Why not have your say?

snoekie

Jun 09, 2012 at 13:01

Merkel, "she was poised to take action", yep sit back and allow the pressure to build so Germany will be uber alles and then rake in the profits for senturies to come!

report this

Prof Eman

Jun 10, 2012 at 10:46

I am not sure that it is in Merkel's interests to resolve the Euro problem, because of its effect on the exchange rate. If they had Deutch marks the exchange rate would be much different and make their exports dearer. So the problems of the euro allow Germany to ride out the recession storm better. The situation is almost similar to currency manipulation of China.

Coupled to that is the opportunity for Germany to buy up businesses abroad on the cheap, and move production home, giving employment, or alternatively giving profits.

No real solution to the problem is thus in my opinion on the cards. More sticking plaster is the best we can hope for.

report this

Harry Brooks

Jun 10, 2012 at 13:38

She says 'we need more Europe'. What's she going to call it: the Fourth Reich?

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

The Citywire guide to investment trusts

In association with Aberdeen Asset Management

Henderson Global Investors: 2014 looks set to be another strong year for UK commercial property


Andrew Friend, acting co-manager*, and Marcus Langlands Pearse, co-manager of the Henderson UK Property Unit Trust (HUKPUT), provide an overview of the key risks and opportunities for the UK commercial property market.

More about this:

Look up the shares

  • WM Morrison Supermarkets P L C (MRW.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Kingfisher PLC (KGF.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Tesco PLC (TSCO.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Antofagasta PLC (ANTO.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • J Sainsbury PLC (SBRY.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • WPP PLC (WPP.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Polymetal International PLC (POLYP.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them
  • Eurasian Natural Resources Corp PLC (ENRC.L)
    Register or Sign in to receive email alerts for items in your favourites whenever we write about them

More from us

What others are saying

Archive

Today's articles

Tools from Citywire Money

From the Forums

+ Start a new discussion

Weekly email from The Lolly

Get simple, easy ways to make more from your money. Just enter your email address below

An error occured while subscribing your email. Please try again later.

Thank you for registering for your weekly newsletter from The Lolly.

Keep an eye out for us in your inbox, and please add noreply@emails.citywire.co.uk to your safe senders list so we don't get junked.

Sorry, this link is not
quite ready yet