Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21
Last Chance to GET FREE Money Crypto Mining with Your Desktop PC - 2nd May 21
Will Powell Lull Gold Bulls to Sweet Sleep? - 2nd May 21
Stock Market Enough Consolidation Already! - 2nd May 21
Inflation or Deflation? (Not a silly question…) - 2nd May 21
What Are The Requirements For Applying For A Payday Loan Online? - 2nd May 21
How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part1 - 1st May 21
INDIA COVID APOCALYPSE - 1st May 21
Are Technicals Pointing to New Gold Price Rally? - 1st May 21
US Dollar Index: Subtle Changes, Remarkable Outcomes - 1st May 21
Stock Market Correction Time Window - 30th Apr 21
Stock Market "Fastest Jump Since 2007": How Leveraged Investors are Courting "Doom" - 30th Apr 21
Three Reasons Why Waiting for "Cheaper Silver" Doesn't Make Cents - 30th Apr 21
Want To Invest In US Real Estate Market But Don’t Have The Down Payment? - 30th Apr 21
King Zuckerberg Tech Companies to Set up their own Governments! - 29th Apr 21
Silver Price Enters Acceleration Phase - 29th Apr 21
Financial Stocks Sector Appears Ready To Run Higher - 29th Apr 21
Stock Market Leverage Reaches New All-Time Highs As The Excess Phase Rally Continues - 29th Apr 21
Get Ready for the Fourth U.S. Central Bank - 29th Apr 21
Gold Mining Stock: Were Upswings Just an Exhausting Sprint? - 29th Apr 21
AI Tech Stocks Lead the Bull Market Charge - 28th Apr 21
AMD Ryzen Overclocking Guide - 5900x, 5950x, 5600x PPT, TDC, EDC, How to Best Settings Beyond PBO - 28th Apr 21
Stocks Bear Market / Crash Indicator - 28th Apr 21
No Upsetting the Apple Cart in Stocks or Gold - 28th Apr 21
Is The Covaids Insanity Actually Getting Worse? - 28th Apr 21
Dogecoin to the Moon! The Signs are Everywhere, but few will Heed them - 28th Apr 21
SPX Indicators Flashing Stock Market Caution - 28th Apr 21
Gold Prices – Don’t Get Too Excited - 28th Apr 21
6 Challenges Contract Managers Face When Handling Contractual Agreements - 28th Apr 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Has Merkel Just "Blinked" and Saved the Euro Project?

Politics / Eurozone Debt Crisis Jun 07, 2012 - 08:17 AM GMT

By: Christopher_Quigley

Politics
Best Financial Markets Analysis ArticleA picture tells a thousand words. The chart above shows just how grave the situation in Spain is. Europe is in crisis and the euro
is in danger of falling apart.




Things have become so serious that President Obama has intervened and has asked British Prime Minister David Cameron to
travel to Berlin today and put an ultimatum to Chancellor of Germany Angela Merkel: "act before it is too late".

It looks like following such pressure that she has finally blinked and altered her former "stone walling" policy. It looks like Spain
will be granted a bank bailout without giving up the type of sovereign authority demanded of Ireland and Portugal and Greece.

According to news reports:
1. " Brussels' officials are examining the possibility of paying bailout funds directly to the Spanish banking rescue fund rather than to the Spanish government. And Germany’s Angela Merkel is looking for a way to enable Spain’s reluctant premier Mariano Rajoy to access eurozone rescue funds while not having to impose new economic reforms."

2. "Unnamed German officials told Reuters that contingency plans were under way, with lawyers studying treaties, for ways to provide funding without a full-on programme."

3. "Derek Scally of the Irish Times reports that British Prime Minister David Cameron is expected to raise the issue with chancellor Angela Merkel when he travels to Berlin today. Mr. Cameron is expected to pass on to the German leader the central message of a phone call he had yesterday with US president Barack Obama on “an immediate plan for the solution of the crisis and restoration of market trust”.

This departure by Merkel, if it proves to be true, will be a game changer. Confirmation will be great news for world stock markets.

It looked like the Spanish banking system was on the verge of collapse. Spanish officials were refusing to request an IMF/EU bailout along the lines forced on Greece et al even though the bond market had effectively closed its doors to Madrid. The premier Mariano Rajoy was of the opinion that additional austerity that such a bailout would demand would cause political and social chaos throughout the Iberian Peninsula. With the bond market defunct Spain's only alternative would have been to print its own currency. This recourse would only have been possible if Spain left the euro. Such an unthinkable possibility motivated George Soros to state the following at the Festival of Economics at Trento Italy last week:

"It is impossible to predict the eventual outcome. As mentioned before, the gradual reordering of the financial system along National lines could make an orderly breakup of the euro possible in a few years time and, if it were not for the social and political dynamics, one could imagine a common market without a common currency. But the trends are clearly non-linear and an earlier breakup is bound to be disorderly. It would almost certainly lead to a collapse of the Schengen Treaty, the common market, and the European Union itself. ( It should be remembered that there is an exit mechanism for the European Union but not for the euro.) Unenforceable claims and unsettled grievances would leave Europe worse off than it was at the outset when the project of a united Europe was conceived.

But the likelihood is that the euro will survive because a breakup would be devastating not only for the periphery but also for Germany. It would leave Germany with large unenforceable claims against the periphery countries. The Bundesbank alone will have over a trillion euros of claims arising out of Target 2 by the end of the year (see note below), in addition to all the intergovernmental obligations. And a return to the Deutschemark would likely price Germany out of its export markets not to mention the political consequences. So Germany is likely to do what is necessary to preserve the euro - nothing more. That would result in a eurozone dominated by Germany in which the divergence between the creditor and debtor countries would continue to widen and the periphery would turn into permanently depressed areas in need of constant transfer payments. That would turns the European Union into something very different from what it was when it was a "fantastic object" that fired people's imaginations.

It would be a German empire with the periphery as the hinterland."

Today it looks like Angela Merkel has heeded Mr. Soros' advice and gone for the "least worst" option. Should she manage to convince her political backers to allow future bank bailouts without sovereign interference Spain will probably agree to stay within the euro. Such a mechanism would also suit Italy should the need arise. The only problem now is that the fund required to solve this problem will need to be in the magnitude of 2 - 3 trillion euros. This is why I think President Obama and David Cameron have decided to get directly involved. The game now is only open to high rollers and the stakes could not be higher. We certainly are living through historic days.


Author's Note: TARGET2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem. TARGET stands for Trans-European Automated Real-time Gross settlement Express Transfer system. TARGET2 is the second generation of TARGET.

Payment transactions are settled one by one on a continuous basis in central bank money with immediate finality. There is no upper or lower limit on the value of payments. TARGET2 mainly settles operations of monetary policy and money market operations.

TARGET2 has to be used for all payments involving the Eurosystem, as well as for the settlement of operations of all large-value net settlement systems and securities settlement systems handling the euro.

TARGET2 is operated on a single technical platform. The business relationships are established between the TARGET2 users and their National Central Bank. In terms of the value processed, TARGET2 is one of the largest payment systems in the world.

Source: European Central Bank website.

By Christopher M. Quigley

B.Sc., M.M.I.I. Grad., M.A.
http://www.wealthbuilder.ie

Mr. Quigley was born in 1958 in Dublin, Ireland. He holds a Bachelor Degree in Accounting and Management from Trinity College Dublin and is a graduate of the Marketing Institute of Ireland. He commenced investing in the stock market in 1989 in Belmont, California where he lived for 6 years. He has developed the Wealthbuilder investment and trading course over the last two decades as a result of research, study and experience. This system marries fundamental analysis with technical analysis and focuses on momentum, value and pension strategies.

Since 2007 Mr. Quigley has written over 80 articles which have been published on popular web   sites based in California, New York, London and Dublin.

Mr. Quigley is now lives in Dublin, Ireland and Tampa Bay, Florida.

© 2012 Copyright Christopher M. Quigley - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Christopher M. Quigley Archive

© 2005-2019 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