Spain bailout fails to rally support as Eurozone trips again

Posted on: 12 June 2012 by Anthony Page

Just as happened after two Greek bailouts - financial markets give a thumbs down to the latest rescue package. How much longer do we have to wait for leadership?

eurozone nationsSadly my prediction yesterday regarding the Spanish bailout has come to pass – the net effect on the money markets was zilch!

International investment markets has given the latest euro rescue package the thumbs down and there is an exodus from Spanish Government Bonds. The stock markets worldwide faltered and fell – only a little mind you, but they still fell. The word in the markets is now that Italy is the next target for ‘the treatment’. 

Why is Italy so vulnerable? Simple, they owe so much money and even if their economy was booming they would still have serious problems making the repayments! As it is they are sliding downwards. So watch this space for more news of their decline. 

To some extent we can pat ourselves on the back – we are not in the Euro and our currency is modestly  strong along with dollar. This is only because Cameron and Osborne took the actions they did! However the weak Euro is going to besiege our economy and slow our recovery down really badly. 

Why is no one in the Eurozone coming forward to sort this mess out? The answer is simple; there is no Leader anywhere in the global economy who has the knowledge, experience or, most important of all, the power to do it!

In Europe the closest politician to fit the bill is German Chancellor, Angela Merkel. She has the power of the strongest economy in the EU and she has the money! Germany is the only country in the Euro zone that has the wherewithal to save the Euro. But if this crisis isn’t sorted soon the problems will be even too big for Germany to sort. 

The President of the European Commission is José Manuel Barroso but he has little power and can only encourage change he cannot force it through. Neither can the President of the European Council, Herman Van Rompuy (has anyone ever heard from or seen him since this crisis started?)  The simple truth is there is no one other than Merkel who can do anything to change what’s happening unless all the Eurozone members agree. They of course have voters to keep happy and not many turkeys are voting to line up for Christmas!

If this really drags on it will pull down the Eurozone for many years to come and do frightening damage to the whole of Europe – including us. Give him his due, David Cameron has been calling for decisive action but nobody wants to listen to him. The ball is very much in the court of Angela Merkel but she is hampered by the views of her voters which are basically ‘Why should Germany pay for rest of the Euro zones’ mistakes?’ A very fair question!

If France, Germany and some of the Scandinavian EU members got together with a plan they could impose it on the others. The threat would be to do away with the Euro and go back to the old currencies. In the final play out of this game this could very well happen but it would mean mayhem for the weak EU countries and would cause a global recession we have never seen the like of. No the game play now is for the US, UK, Germany, France to put pressure on the other single currency states to take big bold decisions and get this problem sorted.

The world now needs a Churchill or Thatcher – but sadly there are none around! So girls and boys let’s just stumble on!

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