The financial vortex is swallowing the European markets and the wave of instability is expanding to the east and west of the globe. Stocks and currencies are under renewed pressure. They should decline further in the coming days/weeks.
Euro: More weakness ahead?
Here, we are again. Stocks and currencies are under renewed pressure and should decline further in the coming days/weeks. The uncertainty linked to the complex European’s situation is exacerbated by the disunity among member states and a weaker economic scenario. The Euro, in particular, could fell to 1.3550, 1.3450, if the level of 1.3970 is not overcome again. In effect, the European Gross Domestic Product (GDP) printed 0.2% in the second quarter, down from the 0.8% in the first quarter of the year. Consumption should be mild in the coming months as well.
The job market has softened, along with the economic sentiment. In August, it declined at a pace second only to the one registered in 2008, when the financial crisis hit the world. So,the European Central Bank (ECB) will keep rates low for now. The council is now concerned about growth prospective, since inflation is expected to contract. Nonetheless, rates could again decline, if the economic situations would dramatically deteriorate and inflation have finally moved below the ECB benchmark of 2.00%. In reality, investors are more concerned about the never ending debt crisis in Europe, since the prospective is not encouraging. Let us see how.
How about Greece?
Last week, the German constitutional court approved both the first Greece’s bailout of euro 110 billion and the European Financial Stability Facility (EFSF), the fund created to help troubling European states. Nonetheless, the court specified that the fund should be used as a temporary measure only. On September 29, when the European parliament will vote the second rescue package for Greece, the court’s decision will come to play. Apparently, Athens is not implementing the requested fiscal reforms. Germany, along with other European countries, does not agree with a new bailout. With no aid from Europe, a default would become probable.
The debt of Greece is huge and there is no much more the financial community can do to support the country. A bankruptcy could be a traumatic experience for Europe, but also an opportunity to begin a new phase that could reinforce the continent. It might also be a weak-up call for those nations that have been reluctant to implement radical reforms within the community.
A painful end is for a radical change?
The European debt challenge has deteriorated over the years, contaminating the well-being of the entire continent. In order to find a quick fix, huge amount of money has been invested to help the troubled European nations. In exchange, the financial community asked governments for radical reforms. The results have been unsatisfactory. Measures taken so far have focused more on the short term, like spending cuts for example, then on the longer term approaches, like fiscal and pension reforms. Radical solutions are not very popular among the electorate and require time to be implemented. Nevertheless, the community has to work together to renew the dream of the founding fathers.
The feeling of inaction is now predominating, as well as an apparent lack of leadership. Greed has been surfacing among member states. What is the solution? An organised European financial policy with a centralized authority should be mandatory and the euro has to remain the backbone of the entire continent. Europe is a country of huge potentiality. The level of education, knowledge and technical research is very high among member states. The continent has a good social system and a good quality of life. It could be an inspirational light in this fragmented world. European leaders have to step-up and make the necessary reforms. The benefits are there and will be enjoyed by the future generations as well. A step back into the past is not an option. However, politicians have to act and do it fast.
Angelo Airaghi, www.ProfitsOn.com
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed, neither the information presented nor any opinion expressed constitute a solicitation of the purchase or sale of any forex, futures or commodity product. Those individuals acting on this information are responsible for their own actions. Forex, futures and commodity trading may not be suitable for all recipients of this report. The risk of loss in trading forex, futures and options can be substantial. Each investor must consider whether this is a suitable investment. All recommendations are subject to change at any time. Past performance is not a guarantee of future results. Please Note: All performance figures and illustrations were obtained using historical back testing on a computer and are not the results of an actual account. No guarantee is inferred that future performance will be like the results shown. Futures, forex and options trading involve risk. There is a risk of loss in futures, forex and options trading.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.