Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Gold And Silver – Elite Supernova Death Dance In PMs? - 1st Nov 14
Pretium - Canadian Golden Elephant - 31st Oct 14
What USA Today Got Wrong About the Stock Market Fear Gauge - 31st Oct 14
Election Result - Labour Wins South Yorkshire Police and Crime Commissioner - 31st Oct 14
Gold Price Falls, Stocks Record Highs as Japan Goes ‘Weimar’ - 31st Oct 14
EUR/USD - Double Bottom Or New Lows? - 31st Oct 14
More Downside Ahead for Gold and Silver - 31st Oct 14
QE Is Dead, Now You Tell Me What You Know - 31st Oct 14
Welcome to the World of Volatility - 31st Oct 14
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Free Forex Forecasts

Eurozone 2013 Breakup Now Even More Likely

Politics / Eurozone Debt Crisis Dec 20, 2012 - 12:13 PM GMT

By: Money_Morning

Politics

Martin Hutchinson writes: To the complete shock of several analysts, the Eurozone managed to make it through 2012 without breaking up. However, 2013 is another story.

Now that Italy's Prime Minister Mario Monti has resigned, there's a good chance that Italy will be in the forefront of a new Eurozone crisis.


That means 2013 doesn't look to be a good year for the euro, either-especially with new Italian elections likely to take place in February.

Of course, the EU establishment hopes that Monti can remain in office, but with four very different candidates now jockeying for position, Italy is one of the continent's great question marks.

Here's why...

The leading candidates in this crucial contest include:

•Silvio Berlusconi, leading the remnants of his former rightist coalition,
•Monti himself, currently in negotiations with several centrist parties,
•Luigi Bersani, leading the left-wing Democrats, currently regarded as most likely to win
•And comedian Beppe Grillo, whose Five Star Movement is leftist and anti-authoritarian.

Of these four, only Monti and Bersani would represent the continuation of the status quo.

Meanwhile, the return of Berlusconi, whom the establishment forced out in 2011, would be a nightmare for the euro. That goes for the ascension of Grillo as well.

In the balance of this pivotal contest could be the fate of the Eurozone itself.

At the extreme, Berlusconi or Grillo (or a coalition between the two) would almost certainly take Italy out of the euro, since Italy is capable of surviving independently. After all, its current account deficit is only 1.4% of GDP.

What's more, any move toward independence by these two would allow Italy to throw off the EU-imposed "austerity" policies that have inevitably proved both unpopular and recession-causing.

At the other end of the spectrum, a Monti government (if one could be formed) would continue austerity and allow the euro to survive - at least until some other country such as France or Spain blew it up.

In the same vein, Bersani would attempt to keep Italy in the euro but would reject public spending cuts and demand even more handouts.

Judging by what Greece has been allowed to get away with, this might well work for a time, but one has to have real sympathy with the German, Finnish, Dutch and Estonian taxpayers who will be made to pay for all this.

2013 Eurozone Forecast: There's More To It Than Italy
And there's the sleeper problem, France. Even if Italy doesn't blow up the euro there's a good chance France will.

Don't be fooled by those bond yields, either. French 10-year government bonds currently yield only 1.97%, far below the 5-6% yields of equivalent Spanish and Italian government bonds - but that only proves that bond dealers can't recognize a crisis until it hits them in the face.

In 2006, after all, they were trading Greek bonds at less than 0.5% yield above German bonds. So much for rational markets.

What's also worrisome are the disappearing French millionaires. They are leaving the country in droves because of President Francois Hollande's ridiculous new tax policies.

It started when Bernard Arnault, France's richest man, made headlines when he renounced his French citizenship for Belgium in October.

However, this flight of wealth is not limited to the hyper-rich like Arnault. Last week it was revealed that French film star Gerard Depardieu had also moved to Belgium. Since Depardieu is a chevalier of the Legion d'honneur and of the Ordre national de Merite, it's not as if he doesn't have substantial ties to his homeland.

Anecdotally, many other wealthy Frenchmen, less well-known than Arnault and Depardieu, are making the same decision. It is tough to live in a country which not only taxes your income at 75%, but then adds an annual wealth tax of up to 2% on your capital.

Meanwhile, France currently has a budget deficit of only 4.5% of GDP, but that will go up, especially as the country is expected by the Economist team of forecasters to have only 0.1% economic growth in 2012 and none at all in 2013 - and given the exit of millionaires, the latter estimate is almost certainly too optimistic.

A Myriad of Reasons the End Is Near
If you want other reasons why the euro might break up in 2013, there is a laundry list of reasons why the end is near.

You can try Greece (even the Germans may someday get fed up of exorbitant Greek bailout demands.) Then there's Spain, which is pretty rickety but no more than that, provided its richest province, Catalonia, doesn't try to secede.

Or Cyprus, which is bust, but most likely to get a bailout from the Russian Mafia who dominate its economy. Or there's Portugal, which everyone's forgotten about and is trying manfully to solve its problems, but is expected to suffer 3% declines in GDP both this year and next - EU-imposed austerity is yet again proving very painful.

Then there's Slovenia, which ought to be rich and solvent, but through mismanagement has managed not to be solvent. And Ireland, which has got part way to solving its problems but isn't out of the woods yet.

You get the picture.

What's more, Germany has an election in September/October 2013.

Currently the Germans appear docile, likely to re-elect Angela Merkel, or possibly her Social Democrat opponents, who are committed to the euro and bailouts.

But if the road between now and then has been too rocky, even German voters may decide giving the government a blank check for four more years of bailouts isn't too smart.

In that case, they will doubtless find a German equivalent of Beppe Grillo and throw the EU into even more confusion.

It's possible that the euro will survive in its current form until next December. But I wouldn't put much money on it.

However, the eurozone's troubles and the United States' apparent strength should make it an excellent year for a European vacation!

Source :http://moneymorning.com/2012/12/20/2013-eurozon....

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014