Monday, April 30, 2012

End of austerity ?

An interesting week ahead in markets . Sterling / € at 1.23 today . The pound fast becoming a safe haven despite the UK's dire fundamentals . 1.25 possible by the end of the week .The €-zone rapidly heading for a political and financial confrontation , if not a full blown crisis. On one hand cash rich Germany . On the other profligate southern Europeans and their champion , the likely new French President, Francois Hollande . Will Germany listen to France and  accept the need for an easing of austerity ? If it doesn't what will happen to the Franco-German axis ? How will markets respond ? How will the UK ever generate growth if sterling continues to strengthen ? With unemployment at 24% what can the Spansih government do to stave off social unrest ? How will Italy's voters respond to the lengthening recession ? What happens if the Greeks vote against further budget reductions in their parliamentary elections on May 6th ?