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Will the EU ‘Greece the Wheels?’

Posted by Larry Doyle on February 9, 2010 11:03 AM |

The recent market volatility reflects the fact that our overall economic and market foundations are anything but secure. In fact, dare I say the market over the last few weeks resembles a rollercoaster. While our market rollercoaster, with Uncle Sam’s assistance, climbed the wall of worry in 2009, so far in 2010 we are cascading along and taking some hard turns at full speed. Keep those seats belt fastened.

What has precipitated our 1% upward move this morning? News from the Euro-zone that the EU will backstop Greece’s budget deficit or, if I could stick with our theme, the EU will “greece the wheels” of our rollercoaster.

Bloomberg provides interesting insights on this topsy-turvy ride in writing, Equities, Euro, Commodities Rally on Greek Aid Speculation:

European Union leaders will discuss Greece’s plans to reduce the region’s biggest deficit when they meet Feb. 11, and European Central Bank President Jean-Claude Trichet’s decision to leave a meeting of policy makers in Sydney one day early fanned speculation that officials will agree on aid. European Commission President Jose Barroso said investors would be wrong to bet against the euro.

“The markets are smelling a deal for Greece, and for that reason, we’re seeing some stabilization,” said Robin Marshall, director of fixed income in London at Smith & Williamson Investment Management, which oversees about $20 billion. “It’s hard to see there not being one, given the potential fallout and contagion effect.”

While the EU may very well step in at this point to support Greece, the fact remains the fundamental economic issues in Greece are not going away. This EU maneuver will be a short term stopgap and provide another in what will assuredly be a continuing saga of ups and downs on our global economic rollercoaster.

I hope you have an empty stomach. At the bare minimum, bring a barf bag.

LD

  • Fed Up

    Whether it is the EU “greecing the wheels” or our Fed and Treasury driving the car, do you think these operators are fully capable of bringing this ride in for a smooth and safe finish?

    How do we know they are not going to drive this thing right off the tracks….or dare I say it is already off the tracks, how do we know they can get it back on the track?

    Nice recommendation on the barf bag.

  • Mike

    Buy the rumor… sell the news!!

    • LD

      The debate currently is over some semblance of loan guarantees made by the EU to Greece and potentially other nations.

      What are the terms? What are the covenants? How restrictive? How onerous? Not that Greece has any real choice at this point but all these questions will determine how quickly and how aggressively Greece will work to get its fiscal house in order.

      If the EU and Germany provide easy terms, then we should expect other nations to look for a similar sort of bailout.

      This high stakes drama has many acts yet to play out. Not yet determined whether it will be a Greek tragedy or not…the potential is still there!!






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