Eurocrash: who is buying the theatre?
Friday 27 July 2012
Despite a certain amount of hyperventilation by the British media, the "whatever it takes to protect the eurozone from collapse" meme was nothing particularly new, and once again there is no mention that Draghi is a member of the quartet drafting the new fiscal treaty. The president of the ECB gets another free ride.
Another one of the quartet, Barroso, is in Athens, and we are also getting interference from that source. The AFP news agency laughably tells us that the commission president is in Greece "to finalise spending cuts", amounting to some €11.5 billion.
Alongside is Greek Socialist leader Evangelos Venizelos, reported by Handeslblatt. In a highly dramatic statement, he declares that Greece's exclusion from EMU would be "suicide for the eurozone".
The theatre is enough to trigger what will be a short-lived rally on the markets, though Handelsblattisn't buying it. It's reporting that bankers are betting on there being merely days before Greece quits the euro (headline above).
If this is to happen, the Draghi/Barroso play is entirely compatible with such a scenario. One would be expecting them to deny the deed right up to the moment of execution. In that case, this is indeed theatre.
The British media, by and large, seem to be buying it, but then the editorial focus is on the Olympics. Ambrose, however, is the rare exception. The [market] euphoria is unlikely to last long unless the ECB comes through with concrete action after its pre-holiday meeting next week, he says.
Meanwhile, he cites Marc Ostwald from Monument Securities, who dismisses Draghi's words as "cheerleading bluster". Gary Jenkins from Swordfish calls them "a bluff to get through the summer". "Spain is very close to the precipice, and its pretty much game over already, " Jenkins adds. "Today's action was a short-covering rally".
And so it is that the play goes on. I'm with Ambrose on this one – deep scepticism is called for, and when AEP and the Germans seem to be of one mind, we can expect some interesting developments real soon.
As always, though, the "colleagues" may have a rabbit in that hat of theirs, but this one is going to have to be quite remarkable to get them past the holiday period in one piece. Stand by to be amazed.
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Richard North 27/07/2012
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