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Opinion: Are we one step closer to eurozone unity?
28/06/2012
By Tim Kirkham, director, risk advisory services at currency specialist HiFX
The proposed introduction of a new single banking supervisor run by the ECB which could lead to funds been directly injected into the banks is a real positive step in the road to greater eurozone unity.
By granting banks unsecured capital outside the individual states control , individual European governments are escaping the financial noose that previous proposals created. This means that governments can raise capital via bond markets for spending needs, supporting their economies, rather than shoring up liquidity tight financial organisations.
It’s a proposal, and there will be many political hurdles ahead, but for us a real step towards a more cohesive Europe and perhaps the Euro can rest on the ropes for a little while. These Euro meetings could grow in importance in the coming weeks as we watch for signs of a reduction in Merkels intransigence.
Market Reaction: The Euro liked it as well rising from 1.2460 to 1.2620 before settling at 1.2580 against the US Dollar. Euro strength was also seen against GBP which retreated from 1.2500 to 1.2420. More importantly the yield on 10 year government debt in Spain and Italy fell by 50bps.
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