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Friday, 23 December 2011

What Will the New Year Hold for the Eurozone?

New Year, Finance, Curernt Affairs, fireworks

As the markets come to a close for the Christmas break the Pound is hovering just below 1.20 against the Euro at 1.198. With very little Economic data set for release today, markets appear to be settling at the current rate after a 6-month push that has seen Sterling grow from strength-to-strength. BBA Mortgage Approvals fell from 35.2K in October to 34.7K in November and the Index of Services released by the Office of National Statistics also declined from 0.7% to 0.2%; neither of these figures have had much bearing on the bigger picture.

The Eurozone faces many problems as we enter the New Year; Greek debt; Franco-German political conflict; and a supreme drop in economic confidence to say the least. But tentatively speaking there are some movements which could inspire a turnaround in sentiment.

Since the European Central Bank provided a huge €489 billion in three-year loans to Euro area banks, Italian and Spanish 10-year bond yields have both fallen as a result of the improved liquidity. This is a small-stepping stone, but a step in the right direction towards deeper Eurozone fiscal unity.

One person in the finance industry, Mark Mobius (who is in charge of over £31 billion in market investments at Franklin Templeton) has even put a date on Europe’s revival; June 2012 marks his perceived turnaround point, when the phoenix-like Euro will rise from the ashes of the debt crisis and soar to economic glory once more. This rapid recovery seems somewhat farfetched, but two months ago nobody would have even suggested it; so hope can be ascertained from Mobius’ overactive optimism.

The official verdict contradicts Mobius’, with European Council President Herman Van Rompuy commenting: “The path is long, longer than we expected, but let there be no doubt, there is a fundamental political will to move forward as a union. We have a moral duty to continue this mission.” So with language evoking World War I enlistment campaigns the EU council leader offers a more sobering view, but one that remains tinged with optimism.

The next few months’ progress will hinge upon the ability of French and German leaders to A) align their views and B) persuade Britain to join the EU treaty group (something they failed to do at last week’s EU summit in Brussels). A French election looms large and current President Nicolas Sarkozy will be mindful to retain France’s top AAA credit rating (under risk from multiple ratings agencies) whilst also preserving popular policies of national interest to ensure he stays in power; stability is key to the Eurozone’s resuscitation and recovery.

In conclusion to a fascinating year of financial furore; the future of the Eurozone is still incredibly fragile, but EU leaders and banks alike are doing all they can to aid the resuscitation process; only time will tell as to how effective their efforts prove to be.

Cutting Edge Current Affairs Courtesy of:
Josh Ferry Woodard 

pound, euro, chart, current affairs

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