The end of another act in the play “Collapse of European Union” – interval, curtain, but with no applauses though. Crisis lasts, but European leaders have their summer holidays anyway. It is high time to think things over and make predictions – analytical minds are approaching the busy season. It is worth paying tribute to European leaders, for they have suggested something constructive during the closing summit – for example, the idea of bank recapitalization by means of attracting the means of aid funds has already gained real shape and started being implemented.
Of course, it does not mean that it will magically happen at once, as the time is working against the European Union. International finance management, which is far from ideal, and peculiarities of national economies are one of the reasons of such situation.
However, internal political misunderstandings of European countries should not be neglected. Anyone may guess how hard it is to bring everyone “to a common denominator”, even if this denominator is called “protection of common currency”. The logical question is – what will happen further? How will the renovated European Union look? Will it be a political or a financial union? Probably, the optimum alternative is a banking union with one controlling organ and common insurance scheme. Central Bank will have to expand its terms of reference and create a “common European treasury”, which would be empowered to control national taxes and expenditure, preventing corruption and bribery from prospering.
Another effective measure may be provided by uniting government debt instruments. In this reference, common European bond will be issued for debts exceeding 60% of GDP. Well-thought structural reforms, aimed at rising competitiveness, higher employment, and better economic results are supposed to give the European Union a safe bearing point.
In the framework of taken measures control over the countries’ economic activities will have to be strengthened – authorized persons are supposed to be subjected to European Parliament and national legislative bodies.
Some of the abovementioned measures can be implemented rather soon; for example, expanding the terms of reference of European Central Bank, as for this purpose no additional amendments are to be introduced into common European legal basis. However, such delicate matter as strengthening common European integration does not seem possible to be realized soon. The reason for this is rather logical, namely, different “political and emotional” perception of financial crisis and different economic basis, which make the process rather problematic.
The task of trust restoration and managing the flow of capital currently are of top priority, as existence is impossible without them. Whether European Union will manage to solve this depends on the readiness of member countries to structural reforms. Transition to banking union is hard to accomplish due to tough economic situation and worsening financial system.
This seems to be an endless circle…
Nevertheless, recent dynamics of common European currency is rather optimistic. Euro future 6E is undergoing a rapid recovery after a three-week drop, having set local high at the point of 1.2330. Relocation of contract volume upwards to point 1.2280 shows that trading participants are interested in such price, whereas forming support at the point of 1.2123, supported by strong demand at the point of 1.2175, signals about rising activity in bullish sector, not only about covering short-term positions. All prices have been reconsidered from euro future 6E for EUR/USD currency pair.
