Greek Contagion – Euro hits new low despite EU Bazooka as Political and Social Fissures Increase

The European Bazooka which led to a massive short covering rally on Monday has been proven a complete waste in just 5 days. Reports of political and social fissures within the European Union and more importantly the prospect of slow growth in the whole region due to fiscal cuts has led to the Euro falling even below the level of last week.This despite the raison de etre of the bailout being the “defence of the Euro” .The main problem with the European Union remains the disparate fiscal policies of the sovereign nation in the EU subject to a common monetary policy.This seems unsustainable in my view despite the attractiveness of a common currency and market for the individual countries. Gold has been rising higher as the 2nd most traded currency is falling faster than a banana currency.The momentum players are back predicting parity with the dollar ,however the dollar’s strength also does not seem sustainable due to high fiscal deficits and growing debt.US has seen growth coming back but people doubt whether the momentum can be maintained in the absence of fiscal and monetary stimulus.One thing is for certain , we will continue to see volatility and unpredictable market actions in the future.

Euro falls to 17-month low on euro-zone debt worries- MarketWatch

The euro slumped on Friday to a 17-month low against the U.S. dollar, as a report that France’s president had threatened to pull his nation out of the euro zone rekindled worries about financial stability in Europe.Nicolas Sarkozy threatened to pull France out of the euro zone unless other members promised to help Greece at the crucial meeting of ministers in Brussels last Friday, according to a report in Spain’s El Pais.

Details of the meeting were apparently revealed by Spain’s Prime Minister Jose Luis Rodriguez Zapatero as he met behind closed-doors with Socialist party leaders on Wednesday.An unnamed source at that meeting relayed Zapatero’s account that at one point in Brussels, Sarkozy “banged his fist on the table and threatened to leave the euro, which obliged [German Chancellor] Angela Merkel to bend and reach an agreement.”

Worries over debt levels in the euro zone persist, even after the announcement of a 750 billion-euro financial-stabilization program by the European Union.