The anti-crisis EU summit in Brussels is going on. The final resolution hasn’t been worked out yet. However yesterday’s session suggested a pessimistic scenario for the future of the eurozone and its currency.
Unity is the main power that could support the eurozone. This is the idea that most politicians expressed in advance of the summit. However, there has been no unity so far. Nicolas Sarkozy called the current summit “the last chance to save Euro”.
The experts of have analyzed the situation to find out whether the situation in Europe is really that bad.
What are the EU’s problems?
Before the summit politicians preferred to demonstrate unity in public. However, yesterday David Cameron said that first of all the UK government was concerned about Great Britain’s economy, while the eurozone’s interests were secondary. Hungary supported the UK while Czech Public and Sweden took a timeout to consult with their legislators. The EU has split in two parties:
According to the recent survey conducted by GfK Investment Barometer, most eurozone citizens believe that the common European currency will stay alive at least within the next 10 years.
However, non-eurozone EU members assume that Euro is not viable. For example, Czech Republic and Poland used to be planning to enter the eurozone but later canceled those plans. The population of these EU countries supports their governments.
Some experts do not believe in the eurozone’s bright future. According to the recent survey conducted by Bloomberg, almost 50% of the respondents are sure that at least one country will leave the eurozone within the next 12 months. 30% of them are sure that will happen within the next 5 years. The analysts of JPMorgan Chase say it is time to hedge against the disintegration of the eurozone.
Salvation plan
According to , the recent agreements reached during the 1st day of the summit cannot be called an efficient plan of coming out of the crisis:
The budget deficit of all the eurozone members must be limited to 0.5% instead of the current 3%. Some easing of restrictions is possible for the members with public debts below 60% of the GDP. The limit for them is not specified. There has been set no time limit for the reduction of the budget deficit down to 0.5. Yet eurozone members have already adopted their budgets for 2012 with much higher limits. It appears that the 0.5% limit will take effect only in 2013. However, it is not clear whether Euro will survive till 2013.
It was decided to limit the EFSF to 500 billion euro. Once, again, there is no specific time limit. Secondly, the funds will be insufficient, if Spain and Italy will join Greece, Ireland and Portugal .
Because of the demarche of the UK and some other EU members the eurozone agreement will need revising. Some participants of the EU summit say it will take several months to do that.
Investors do not believe in strong Euro
According to the analytic team of FX Clearing, in advance of the summit investors were disappointed with Angela Merkel’s speech. She said that she didn’t expect any major breakthrough during the summit and that it would take the eurozone economy years of hard work to recover and become stable once again.
EURUSD has collapsed. The psychological barrier 1,3320 has been overcome. Now brokers expect EURUSD to test 1,2820.
Stock indexes around the world seem to have followed Euro.
Moreover, not so long ago S&P warned all the 17 eurozone members about possible rating cuts.
What are the near term prospects of EURUSD?
According to the experts of , the bears are dominating the market. If the price consolidates below 1.3400, the next support will found at 1.3350.
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Does Euro have a chance to survive?
