Intraday Market Thoughts

Europe Remains in Focus as Tremonti Calls for Euro Bond Solution

by Kyle Morrison
Aug 15, 2011 7:51

Italian finance minister Tremonti calls for euro bond solution to debt crisis, France growth fears continue in face of new budget cuts, Japanese economy contracts further in Q2. By

This weekend's intervention by Italian finance minister Giulio Tremonti in once again calling for a euro bond solution to the current fiscal crisis in Europe, was another attempt to try and increase the pressure on Germany to stand surety behind the rest of Europes huge debt burden. His intervention was no doubt designed to raise the stakes ahead of tomorrows meeting of German chancellor Angela Merkel and French President Nicolas Sarkozy in Paris.

Tremonti said that the current crisis would be nowhere near as critical if the mechanism had been in place. The call was swiftly dismissed out of hand by German finance minister Schauble as unworkable while member countries control their own monetary policy.

Concerns about the rate of growth in France continue to worry investors in the wake of last Fridays Q2 GDP numbers which showed that the French economy showed no growth at all after a 0.9% rise in Q1, reinforcing concerns about the triple A rating of Europe's second largest economy. With economic data across the euro zone flat lining or even slumping it is becoming clear that the current crisis is affecting sentiment across Europe. With Sarkozy asking his ministers to come up with new budget cuts in the coming weeks there is a concern that further austerity could actually make the problem worse without a proper strategy for growth.

Concerns about the strength of the Japanese yen continue to weigh on the Japanese economy in the aftermath of the earthquake and subsequent tsunami in March. The recent rise in the yen on the back of safe haven buying continues to hamper Japanese companies and this mornings Q2 growth figures highlight the problems facing the Japanese economy. GDP contracted 0.3% in Q2, less than analysts forecast for a 0.7% contraction and a 0.9% contraction in Q1, as reconstruction work begins in earnest and help pull one of the worlds largest export economys back onto its feet.

Japanese finance minister Noda warned last night in the wake of these figures that hes ready to sanction further measures to intervene to weaken the yen, as one of the worlds biggest exporters continue to struggle out of recession.


Latest IMTs