Mike Lenhoff's market tactics - 28 November 2011
Did the euro get the thumbs down from last week’s failed bund auction? Wolfgang Munchau writing in this morning’s Financial Times described the eurozone as ‘... now subject to a run by global investors.’ No doubt others share his sentiment that it is doomed to ‘... break up very soon.’ Well, cometh the hour, cometh the man, or rather in the eurozone, cometh Mrs Merkel!
Mrs Merkel may reign but she does not rule, yet! She will get her chance though if she means what she says about the need for a fiscal union along with the rigour of German budget discipline. But to facilitate this will require urgent treaty change which she will have to drive through at next week’s EU summit in Brussels. On the agenda will be proposals from Germany and France for amendments to the EU’s Lisbon Treaty inrelation to enforcing budget discipline and strict fiscal governance for the eurozone.
Agreement may not be easy. In view of the need to respond boldly, convincingly and urgently, Germany and France are exploring options intended to accelerate the process of fiscal integration. According to Reuters, the idea of a more ‘manageable’ Stability Union consisting only of eurozone members is one of these while another idea focuses on a separate agreement outside the EU Treaty involving a core of 8 to 10 eurozone members as a means of ‘seeding’ fiscal integration. These are radical initiatives from those who want the euro to survive. They may well be a means of applying pressure on all EU members to get serious. More >