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Markets pricing in endgame for the euro, warns UBS

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posted on Nov, 27 2011 @ 03:17 PM
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Markets pricing in endgame for the euro, warns UBS



Markets are “pricing in the endgame” for the euro as the situation moves faster than politicians can act, UBS has warned ahead of a key meeting between eurozone leaders and US President Barack Obama.



The meeting will be held amid Italian media reports that the International Monetary Fund (IMF) is preparing a €600bn (£514bn) loan for Italy. This will give Mario Monti, the new Italian prime minister, breathing space to implement reforms before debt refinancing is needed, La Stampa reported. Speculation is also mounting that Spain may also need to apply to the IMF or the European Financial Stability Facility after its borrowing costs soared last week.

Germany’s cost of borrowing has also jumped, with yields on 10-year bunds moving ahead of the more indebted countries of the UK, US and Japan.

“Financial markets continue to move faster than politicians,” Mansoor Mohi-uddin, head of foreign exchange strategy for UBS, said. “Fixed income investors are betting that either Germany moves towards a fiscal union with its eurozone partners or that, without the ECB willing to buy unlimited amounts of sovereign bonds in the secondary markets, the eurozone will break apart.”

Should further integration of eurozone countries occur, then Germany’s finances will get worse, he said. “If [a closer union] involves fiscal transfers to shore up the single currency area then Germany’s fiscal position itself will deteriorate,” Mr Mohi-uddin said.



Concerns are increasing that the lack of a resolution by European politicians could result in Europe’s problems spreading globally. Canadian finance minister Jim Flaherty said yesterday that the debt crisis is creating “contagion” outside the eurozone. “Again today, we are staring a crisis in the face,” Mr Flaherty said.

Yesterday, Chancellor George Osborne warned that the euro’s collapse would have a massive impact on the UK’s economy.

“We have contingency plans for all situations,” Mr Osborne said. “We have obviously stepped up that contingency planning in recent months, you would expect us to do that as the British government.

“That doesn’t mean we are predicting any particular outcome, we are just ready for whatever ... the eurozone throws at us.”


Well not sur ehow further integration would result in Gernmany's financial position worsening, but if it does, then it will only spiral further out of control and much faster with downgrades and lost confidence and increased debt costs.

The alternative seems to be either the ECB or IMIF intervene significantly which means more austerity and tax payers footing the bill. Not popular and is already causing a lot of civil disturbance which is only going to intensify, and therefore become a further drag on the economies involved and the pressures on paying down on debt costs.

Anyway, is the current malaise in the Euro the 'endgame'? It's to be seen and what the fallout will become. It does seem policy makers are behind the curve on the markets, and they are having trouble keeping up.



posted on Nov, 27 2011 @ 03:52 PM
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if the IMF has to intervene, it is endgame - they are known as the last resort and shows a country is unable to meet its requirements - in other words, if you take a handout from the IMF, you are forever sucking from its teats.



posted on Nov, 27 2011 @ 06:17 PM
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reply to post by MidnightTide
 


Usually the loan requirements it's self is slavery for a nation .. high interest rates, steep repayment periods, huge obligations to reduce spending, and of course the obligation that IMF debts must be paid before anything else.


A 600 billion Euro bailout of Italy by the IMF is by all accounts ... a default. It's massive.. and considering the Eurozone shored up it's available funds for it's own European version of the IMF, the USA is likely going to be the main funder.



posted on Nov, 27 2011 @ 06:23 PM
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reply to post by Rockpuck
 


going to need approval from congress to get those funds though, unless they sneak it via the FED.



posted on Nov, 27 2011 @ 08:24 PM
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reply to post by MidnightTide
 


www.imf.org/external/pubs/ft/wp/2011/wp1172.pdf+&hl=en&gl=us&pid=bl&srcid=ADGEEShSg7OTtR2sqfMn91XrkE3MsIutn2QJED2U-6sZDwdrvDvizIKqpKMVnlf-d5cAM1rkrqcB BB53v7WCMYQORDcuTk8seJPXWBrcvFAssa-q_4Nas4T3JJBTegclcRKbvt7jCSR5&sig=AHIEtbSXb_4vEXsOjCc9_J5A7W3C26WzCQ&pli=1

www.imf.org...

The United States funds the IMF, which granted was created by Congress in the first place, but current funding is set as an obligation. That means no .. Congress does not need to vote to increase funding. Out of a $800b bailout (600b Euros) the United States is obligated for a minimum of $160b Dollars in SRD's



The IMF has special drawing rights to member nations for $1.4 trillion (through the Federal Reserve in our case, I assume) Considering the largest three donors to the IMF: USA, UK and JP are all in a fiscal crisis, it's kind of ironic .. the crippled bailing out the crippled.
edit on 11/27/2011 by Rockpuck because: (no reason given)




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