London (CNN) – Controversial and caddish to some, funny and forthright to others, former Italian Prime Minister Silvio Berlusconi is arguably the most high profile scalp claimed by the eurozone crisis so far.
Whether it was the ‘Bunga Bunga’ scandal or the unbalanced budgets that booted the former cruise-ship crooner out of office remains a point of discussion.
One thing you can’t argue with however is that eurozone membership has robbed Italy of its traditional tool for tackling boom and bust cycles: The currency devaluation.
Cue Berlusconi, who Italians often call "Il Cavaliere." “Leaving the euro is not blasphemy…” writes the 75-year old on his Facebook page.
"What would happen if Italy, Spain or Greece went back to their old currencies? I don't know, maybe there would be a loss of wealth but I don't understand why," Berlusconi later told Italian news agencies.
(CNN) - If recent history is anything to go by, the number 7 has good reason to be feared in the European bond markets.
Once yields on Greek, Irish and Portuguese 10-year notes hit that unlucky figure, they didn’t come back down - pricing three eurozone members out of the markets in quick succession and into bailout limbo.
Though it may be arbitrary, 7 could soon become the cut off point for a new two-tier common currency; an area where peripheral members pay the high price for low growth and lack of reform, whilst the more buoyant economies of the north enjoy record-low borrowing rates.
That is unless someone can convince the German Chancellor that so called jointly-issued “eurobonds” really are the panacea. FULL POST
Athens (CNN) - Greece has voted. New Democracy, its pro-bailout party, prevailed in Sunday’s election and still market reaction has been decidedly muted. Much like last week’s market performance following Spain’s aid request, the euphoria fizzled quickly as traders focused instead on the considerable unknowns looming in the distance.
Among the unanswered questions: Will Greece’s New Democracy party be able to form a government? And how much leeway will it have to soften the terms of its Troika-prescribed austerity package?
Writing to clients today, HSBC economists David Bloom and Janet Henry said Greece’s result may offer temporary relief but warned that “major challenges remain.”
“While a coalition of pro-bailout parties would put the idea of a Greek euro exit on the back burner for now, it would not alter the underlying problems in the euro zone itself,” they added. FULL POST
London (CNN) – For London’s investment community Sundays are more about talking pizzas than politics.
They’re the last chance to unwind before buckling up for the bumpy ride when the markets open on Monday morning.
But across Europe’s financial hub, traders are keeping an uneasy eye on events in Athens and preparing themselves for what many reckon will be a wild week at work.
The 43 year-old Dutchman shot to fame three years ago at the height of the credit crunch as the forthright financier on the BBC’s reality show "Million Dollar Traders."
Van Dam now spends his time running Hampstead Capital, a fund with 500 million euros ($630 million) under management, as well as his new initiative: The Lex van Dam Trading Academy, set up to teach would-be dealers how to manage money.
He took time away from his weekend lunch (and 26,000 followers on twitter) to answer five key questions on what the Greek elections mean for the markets.
1. Will Greece leave the euro?
Yes. They will leave very soon unless the Germans change their tune and throw more money at them. It is slightly unfair though as most of the help Europe gives them is to help the Europeans themselves as opposed to helping the Greek people.
2. Is austerity the right answer?
Austerity is not the answer. The Greek economy is absolutely collapsing and the tax base is going down with it. The American and British solution of printing money is not the answer because it will lead to a total lack of trust in the government because paper money will be worthless. The answer is accepting that people in the West need to work harder and longer.
3. Will the euro survive?
The biggest chance is for a two-speed Europe to emerge with Germany leading the euro pact and Italy in the second group. The German euro will be very strong, the Italian euro very weak though.
4. Eurobonds: The perfect cure or recipe for disaster?
The Germans have done a massive amount of austerity at home with a higher retirement age and lower wage inflation than in the southern European nations. They will not write a blank cheque to the south. Eurobonds mean that the Germans will become responsible for the Greek debt. It will not happen unless countries such as Spain and Italy give up part of their sovereignty.
5. Where are you putting your money now?
My money stays in cash and real assets such as property and gold. Shares are not expensive right now but if interest rates go up even a little they could drop a lot.
Athens (CNN) - Whichever way the Greek people vote in these elections, there are no easy options for the country. It is almost certain no one party will get a majority – even with the top-up seats given to the front runner.
We are facing days of horse-trading.
The best that can be hoped for is that the leaders of New Democracy and PASOK follow through on the noises they are making. That it is time for unity.
They know what that means. That they are going to have to get into coalition with each other. If they do that, Greece carries on.
However, even if these so-called “sensible parties” get into bed with each other, they will still want to renegotiate the deal with Europe.
Europe will not budge on issues such social security, pensions or privatizations. But they might be willing to talk on deficit targets and taxation levels, for example, given the difficulties created by the recession.
There are 1,001 ways that Greece can stay in the euro. But even if the austerity deal is renegotiated, the Greek people face another three to five years of pain.
With a deficit more than 4 times the European Union limit and an economy mired in a deep recession, Greece hurtled towards insolvency.
Then-Prime Minister George Papandreou assured the world Greece was determined to confront its fiscal problem.
“We are making deep changes in our economy, our political system, our society, building the conditions for a stable economic environment, a transparent economy, a viable economy,” he said.
But those promises proved futile. FULL POST
London (CNN) – You’d be forgiven if the mild bounce in the markets Monday had you dreaming of better times for Greece and the eurozone. Your wakeup call comes to you courtesy Christine Lagarde, head of the International Monetary Fund, former French Finance Minister and the latest establishment figure to heap scorn on Greece.
In a lengthy and wide-ranging interview with the Guardian newspaper, Lagarde may have for the first time uttered in public what some suspect many European politicians are saying behind closed doors. It’s payback time for Greece.
Editor's note: This blog was originally published after talks to form a new government following the May 6 election failed. Greece now faces its second election, on June 17.
London (CNN) – Hello, Greece.
The world is again focusing on you. The economic pain and social unrest has rightly made voters and politicians the world over debate austerity, growth and structural reform.
What you are going through has made it clear that austerity is not an easy solution.
You, the Greek people now have a chance to do something I suspect millions in Europe would dearly love to do - vote on whether to leave the euro. That is what June 17 will now be about, because there will be massive pain for you, Greece, if you stay with the economic reforms, and even more pain if you reject the loans from Europe and the International Monetary Fund. Pain either way.
(CNN) – JPMorgan Chase CEO Jamie Dimon shocked Wall Street just after the market closed Thursday with news that the company had lost $2 billion since April 1 on trades in credit default swaps.
Sound familiar? It should. Credit default swaps based on housing mortgages created the tinder that was ignited by rising home defaults to create the conflagration of the 2008 financial crisis.
Trading in derivatives such as credit default swaps were designed to hedge against risk. But as we know, banks and other market players used these tools to create products that seemed to take the danger out of risky bets and reaped huge rewards - right up until the moment they didn’t. Banks and other businesses were stuck on the wrong side of the trade, trapped with a mountain of debt they couldn’t pay.
Speaking on a Thursday conference call – which the Financial Times’ Alphaville called “the most excruciating bank conference call we’ve ever heard” – Dimon said JPMorgan's losses stemmed from trades designed to hedge against risk, but those trades went awry due to "errors," "sloppiness" and "bad judgment." It doesn’t help that, just a month ago, Dimon decried the build-up of credit default swaps at JPMorgan’s London office, first reported by the Wall Street Journal, as a “tempest in a teapot.”
(CNN) – With the election of Francois Hollande as the president of France and a Greek poll dealing a major blow to the coalition government in Athens, voters in Europe are pushing back on austerity.
"I asked for a strong mandate, but people chose differently. I respect their message," Greece’s New Democracy party leader Antonis Samaras said late Sunday. "Today's result expresses people's disappointment towards the implemented dead-end economic policy that tested their limits and didn't include the necessary development policy."
Meanwhile, French voters gave victory to the nation’s first a left-wing president since Francois Mitterrand left office in 1995. "Austerity can no longer be something that is inevitable," President-elect Hollande said.
Both elections have shaken the markets, which yet again are faced with uncertainty about the fate of the eurozone. Will a new coalition government adhere to the agreements that kept the fragile Greek economy part of the eurozone, or will political forces place Greece’s membership among the euro nations once again in doubt? “This could be the start of another deeply uncertain period in Greece with consequences far beyond its borders,” observed CNN correspondent Matthew Chance in Athens.
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