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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.


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