Euro Breakup Rattles Investors Once Again, by Don Quijones

Every so often investors are reminded that the breakup of Europe is a question of when, not if, and it upsets them. From Don Quijones at

Only this time, the ECB is already doing “whatever it takes.”

With hotly contested general elections coming up in France, Germany, and Holland – where yet another upset could be on the cards – 2017 was always going to be a nail-biter for the Eurozone. That was before former Italian PM Matteo Renzi raised the prospects of fresh elections in the home of electoral chaos, Italy.

And investors’ nerves are fraying. The spread between the 10-year yields of French government debt and German government debt has already widened from 0.28% in October to 0.81% today in anticipation of French elections, to be held in April. According to Frankfurt-based Sentix research group, the probability that France could fracture the euro is also rising, reaching 8.4% in its latest survey of investor sentiment as concerns about Marine Le Pen’s threat to the French and European establishment continue to rise. It’s the highest level registered to date.

The poll, which was launched in June 2012, at the height of Europe’s sovereign debt crisis, surveys more than 5,000 retail and institutional investors from 20 countries about their expectations of Europe’s financial markets. The result of the latest survey is clear as day: the euro crisis is once again back front and center in investors’ minds.

A quarter of respondents believe that at least one State will abandon the single currency in the next 12 months. It’s the highest level since Brexit, when Sentix’s fear index reached 27.5%. The highest level ever recorded was during the euro zone’s peripheral debt crisis when it reached 73%. Ironically, no country left, thanks largely to Mario Draghi’s pledge to do whatever it takes to keep the euro intact.

But now, five years later, most of the Eurozone’s existential problems remain unresolved, despite the ECB having frittered €3.7 trillion (or roughly 36% of Eurozone GDP) on keeping the leaking ship — and the region’s biggest banks — afloat.

To continue reading; Euro Breakup Rattles Investors Once Again


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