EUR

All i want to hear right now if somehow from somewhere Jim o'neil of Gladmans Sachs comes out gives us some sense to all this confusion. I heard him in march at a conference in Manchester where he was pretty positive about the the euro at the time and assured us that the eurozone countries will be rescued if need be and that the default within the European is unlikely.

The political solution a federal europe is a most unlikely alternative ... ONE common finance ministery working with ECB is reasonable and therefore excluded.

Euro technicals head towards over sold formation, RBS cheif strategist reports that he see euro back up to 140

Is Shock and Awe a Blazing Bluff?


Edmund Conway writing for the Telegraph says Shock and awe may not be enough to save Europe.

This is a big moment for Europe and for the single currency. The events of the past 24 hours are quite likely to sound the starting gun either towards a more federal Europe or, just as feasibly, to the break-up of the euro so high are the stakes. Weve covered the full run-down of what has been decided elsewhere, so here are a few thoughts:

The European finance ministers are attempting to emulate the G20 summit in London back in April 2009, and to give the impression of throwing a massive amount of cash at the problem.

The provenance of the actual money is questionable. There are two plans under consideration here: 1. An extension of an already existing fund which was already used to help Latvia, Hungary and others by Eur60bn. 2. A far bigger plan to pledge around Eur 440bn of bilateral loans from eurozone members to support each. However, there is very little detail at all on where the money would come from, and the detail we do have is slightly suspicious (for instance, the fact that the euro members need to set up Special Purpose Vehicle to do this is not at all encouraging). The IMF has also apparently pledged to provide a further slug of cash up to Eur250bn and this money, should it actually arrive, is more solid. The first segment will affect the UK, but Britain, as a non-member of the euro, can opt out of the second.

This (bigger) plan is nowhere near approved by euro area governments. It involves significant further integration, so is very unlikely legally to be able to be pushed through without the approval of EU members. Given the no votes to the EU constitution from France and the Netherlands (and Angela Merkels defeat in the Bundesrat elections), can we really be assured of getting this approval? Moreover, there is big potential for legal challenges to the plan. The IMF will also have to approve the disimbursement, and one should not take that for granted either.

The ECB has started its QE journey on the worst footing imaginable, appearing to be forced into taking the decision, rather than doing it off its own back. This is distressing, since the decision to actually engage in QE is the right one. But then there are also doubts about precisely how the scheme will work: we dont know anything about the total amount; we are told that the scheme will be sterilised (meaning it wont actually be true QE (printing money)) but not how.

My impression is that there are likely to be severe challenges both legally, constitutionally and politically to the eur440bn European Stabilization Fund in the coming days as lawyers and investors tease it apart.

Finally, the most amusing thing, to me, is the idea that these measures will help clamp down on the wolfpack of speculators baying around the wreckage of the euro area. If anything, they are rather likely to make billions for the speculators, who will have made a killing on the big increases in equity prices today, and will make another killing when (as I suspect will happen before too long) there is another dip as the questions above start to become discussed more widely.
Is QE the Correct Policy?

I disagree with Edmund Conway when he says "the decision to actually engage in QE is the right one".

For starters, I think it is a bad decision because it fails to address any structural problems. Of course QE never addresses structural problems. Japan is a prime example. In regards to the US, it is far too early to give the Fed any credit for achieving any lasting results with its QE policy. The US banking system and bank lending are both still in shambles.

Secondly, if Conway is correct in that there are severe challenges to getting funding for the eur440bn European Stabilization Fund, the market will call the ECB's bluff, sooner rather than later.

Finally, throwing Euros around like toilet paper is hardly a way to get a rise in the Euro.

hi catnip,
I agree with you about russia, we are long USDRUB from 1 month