Welcome!

News Feed Item

Europeans Need to Embrace Radical Change to Save the Euro

LONDON, December 3, 2012 /PRNewswire/ --

  • A Greek exit and profound restructuring could be the least painful scenario for saving the Eurozone
  • Latest e-book from Saxo Capital Markets argues Eurozone needs to reach rock-bottom before recovery

The Eurozone will bounce back only once its leaders and inhabitants end up in such a desperate situation that they realise the only way out is through radical change, says Saxo Capital Markets.

     (Logo: http://photos.prnewswire.com/prnh/20121115/574147  )

Steen Jakobsen, Chief Analyst at Saxo, comments:

"We are now nearing the point of no return for Europe. Time is running out for Europe as 2012 became an issue of letting the central banks do the dirty job of keeping the tail-risk away though Draghi's put and general easy monetary policy."

"A Greek exit may sound like a frightening scenario, but profoundly restructuring the Eurozone may be less painful than a slow Japanese style death, with deflation, massive fiscal deficits, negative real-rates, housing prices lower than 30 years ago and a stock market valuation at less than 50% of its peak."

In "The Euro in crisis", the third chapter of the e-book in Saxo Capital Markets' FX Debates Series, Saxo analyses the unfolding of the Eurozone crisis as a three-stage process, following its evolution through phases of denial, protest and, ultimately, change.

Steen Jakobsen explains:

"First, in the denial phase we have fiscal stimulus. Then in the protest phase we have changes of political figureheads where there is no real change, but with some milder fiscal stimulus underneath. Then, ultimately, we move to a serious mandate for change. The Eurozone will bounce back only once its leaders and citizens, prompted by social unrest, realise and accept that the only way out is through radical change."

About social unrest Steen Jakobsen comments:

"It's very likely that someone who is getting their salary pummeled, their disposable income pummeled, and their purchasing power pummeled gets upset because, with the high stock market, the richest 1% and the corporations are making all the money. History shows that when the source of tension becomes too big, things can blow up. That's where we are at today."

Saxo Capital Markets sees three potential outcomes to the Eurozone debt crisis:

•             Meeting of the Cardinals - 20%probability

•             Extend-and-pretend Squared - 60% probability

•             Doom-and-Gloom - 20% probability


Meeting of the Cardinals

The Meeting of the Cardinals (MoC) will be the only orderly solution dictated by rational and practical solutions, where some countries need to leave the Euro, whether permanently or for a tempory period.

Comments Jakobsen:

"Here, the guinea pig will most likely be Greece. This will force Club Med to the table and make them accept further loss of sovereignty on fiscal and monetary policy, most likely in a German model where the European Court of Justice becomes the highest-ranking authority.

"The MoC scenario will likely lead to a short-term negative market reaction and a deep one-to-three year recession. However, this could also trigger the final phase of the three-phase crisis model: Mandate for Change. Inside the mandate for change there is a V-shaped recovery when reforms are initiated from the low point. For investors, the MoC is the best solution as it will lead to several years of prosperity amid better debt-to-equity, more realistic future expectations, and a public sector under control."

Extend-and-Pretend Squared

According to Jakobsen, the more likely scenario, however, is that Eurozone policy markets will continue to use delay tactics.

"The extend-and-pretend forever solution is about buying time - more of the same patch work solutions, slowly forcing Europe towards fiscal consolidation, not changing the Maastricht Treaty but the European Central Bank (ECB) charter to allow it to be lender-of-last-resort. This is the final phase of 'Maximum Intervention' - bigger and bigger direct support on liquidity and no impact on the solvency. This outcome is a vicious circle as every time the major central banks start the printing press, people's purchasing power diminishes." explains Jakobsen.

Doom-and-gloom

Under this scenario there are no good solutions to this crisis. Markets would re-test their 2009 lows and there will be a deep rooted discontentment with politics and the banking system, which could lead to social unrest and worse.

Steen Jakobsen concludes:

"The magnitude of this debt crisis is far larger than the market realises. The idea that it's merely a question of Germany paying is not only naïve, but also impossible. They cannot and they should not pay - and nor is the ECB the only solution to this debt crisis. There is only one solution: the system must fail and both the Euro and the Eurozone need to be redefined."

"The Euro in crisis" is the third part of Saxo's e-book, #FXdebates - Trading Insights from our Top Analysts, which focuses on trends in currency movements and pairings, the challenges affecting FX traders and advice on key trading strategies. The other articles in the #FXdebates series will focus on:

  • The US Dollar (published)
  • Yuan Diplomacy (published)
  • Gold - Just another currency?
  • Currency Wars: Battle Of The Weakest

The #FXdebates series of articles will be published over the next three months, leading the way to an event in February 2012 in collaboration with Bloomberg LINK.  

For more information please see:   http://uk.saxomarkets.com/fxdebates

Follow the debates via twitter: https://twitter.com/SaxoMarketsUK

Hashtag: #FXdebates

About Saxo Capital Markets

Saxo Capital Markets UK Limited is a wholly owned subsidiary of Saxo Bank A/S, the parent company of the Saxo Bank Group, an international financial services group specialising in trading and investment across global financial markets. Saxo Bank has operated in the UK since March 2006, initially as a branch of Saxo Bank A/S and since 1 January, 2012 as Saxo Capital Markets UK Limited.

Saxo Capital Markets UK offers private investors online trading and investment in FX, CFDs, ETFs, Stocks, Futures, Options and other derivatives, and online wealth management for Funds, Shares, ETFs, Certificates and Bonds. Saxo Capital Markets UK also offers online trading services to a broad institutional client base including Hedge Funds, Introducing Brokers and Money Managers through our award-winning trading platform SaxoTrader, SaxoWebTrader and SaxoMobileTrader and Saxo's B2B/API services.

Additionally a large base of Banks, Brokers, Asset and Money managers, utilise our award winning white label solutions, in order to provide their clients with access to all or some of our trading platforms and associated liquidity.

Find out more about FX Trading opportunities with Saxo Capital Markets.

Media enquiries
Uriel Alvarado Cancino, Chief Public Relations and Marketing Officer, Saxo Capital Markets UK
+44(0)207-151-2026, [email protected]

Nicholle De Beer, Public Relations and Marketing Manager, Saxo Capital Markets UK
+44(0)207-151-2024, [email protected]

Smithfield
+44(0)20-7360-4900, [email protected]


More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Internet-of-Things discussions can end up either going down the consumer gadget rabbit hole or focused on the sort of data logging that industrial manufacturers have been doing forever. However, in fact, companies today are already using IoT data both to optimize their operational technology and to improve the experience of customer interactions in novel ways. In his session at @ThingsExpo, Gordon Haff, Red Hat Technology Evangelist, will share examples from a wide range of industries – includin...
"We build IoT infrastructure products - when you have to integrate different devices, different systems and cloud you have to build an application to do that but we eliminate the need to build an application. Our products can integrate any device, any system, any cloud regardless of protocol," explained Peter Jung, Chief Product Officer at Pulzze Systems, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
Keeping pace with advancements in software delivery processes and tooling is taxing even for the most proficient organizations. Point tools, platforms, open source and the increasing adoption of private and public cloud services requires strong engineering rigor – all in the face of developer demands to use the tools of choice. As Agile has settled in as a mainstream practice, now DevOps has emerged as the next wave to improve software delivery speed and output. To make DevOps work, organization...
Get deep visibility into the performance of your databases and expert advice for performance optimization and tuning. You can't get application performance without database performance. Give everyone on the team a comprehensive view of how every aspect of the system affects performance across SQL database operations, host server and OS, virtualization resources and storage I/O. Quickly find bottlenecks and troubleshoot complex problems.
Internet of @ThingsExpo has announced today that Chris Matthieu has been named tech chair of Internet of @ThingsExpo 2017 New York The 7th Internet of @ThingsExpo will take place on June 6-8, 2017, at the Javits Center in New York City, New York. Chris Matthieu is the co-founder and CTO of Octoblu, a revolutionary real-time IoT platform recently acquired by Citrix. Octoblu connects things, systems, people and clouds to a global mesh network allowing users to automate and control design flo...
"We are an all-flash array storage provider but our focus has been on VM-aware storage specifically for virtualized applications," stated Dhiraj Sehgal of Tintri in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
With 15% of enterprises adopting a hybrid IT strategy, you need to set a plan to integrate hybrid cloud throughout your infrastructure. In his session at 18th Cloud Expo, Steven Dreher, Director of Solutions Architecture at Green House Data, discussed how to plan for shifting resource requirements, overcome challenges, and implement hybrid IT alongside your existing data center assets. Highlights included anticipating workload, cost and resource calculations, integrating services on both sides...
Unless your company can spend a lot of money on new technology, re-engineering your environment and hiring a comprehensive cybersecurity team, you will most likely move to the cloud or seek external service partnerships. In his session at 18th Cloud Expo, Darren Guccione, CEO of Keeper Security, revealed what you need to know when it comes to encryption in the cloud.
"We're a cybersecurity firm that specializes in engineering security solutions both at the software and hardware level. Security cannot be an after-the-fact afterthought, which is what it's become," stated Richard Blech, Chief Executive Officer at Secure Channels, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
According to Forrester Research, every business will become either a digital predator or digital prey by 2020. To avoid demise, organizations must rapidly create new sources of value in their end-to-end customer experiences. True digital predators also must break down information and process silos and extend digital transformation initiatives to empower employees with the digital resources needed to win, serve, and retain customers.
"We are the public cloud providers. We are currently providing 50% of the resources they need for doing e-commerce business in China and we are hosting about 60% of mobile gaming in China," explained Yi Zheng, CPO and VP of Engineering at CDS Global Cloud, in this SYS-CON.tv interview at 19th Cloud Expo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA.
The WebRTC Summit New York, to be held June 6-8, 2017, at the Javits Center in New York City, NY, announces that its Call for Papers is now open. Topics include all aspects of improving IT delivery by eliminating waste through automated business models leveraging cloud technologies. WebRTC Summit is co-located with 20th International Cloud Expo and @ThingsExpo. WebRTC is the future of browser-to-browser communications, and continues to make inroads into the traditional, difficult, plug-in web co...
Between 2005 and 2020, data volumes will grow by a factor of 300 – enough data to stack CDs from the earth to the moon 162 times. This has come to be known as the ‘big data’ phenomenon. Unfortunately, traditional approaches to handling, storing and analyzing data aren’t adequate at this scale: they’re too costly, slow and physically cumbersome to keep up. Fortunately, in response a new breed of technology has emerged that is cheaper, faster and more scalable. Yet, in meeting these new needs they...
When it comes to cloud computing, the ability to turn massive amounts of compute cores on and off on demand sounds attractive to IT staff, who need to manage peaks and valleys in user activity. With cloud bursting, the majority of the data can stay on premises while tapping into compute from public cloud providers, reducing risk and minimizing need to move large files. In his session at 18th Cloud Expo, Scott Jeschonek, Director of Product Management at Avere Systems, discussed the IT and busin...
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...