Now may start a new edition of the “Greek circus”


The views expressed below are solely those of the author.

Maurizio Giuliani is an Italy-based Financial Advisor. He founded M. Giuliani & Co., an investment advisory firm, in 1994 in Torino. Giuliani is a seasoned expert in world and Europe's macro-finance.

Greece is again on the brink of collapse and threatens to return to the drachma, Italy has public accounts out of control and is next to early elections that will lead to further instability.

The United States continues to attack Germany, first with fines for Deutsche Bank and Volkswagen, then with accusations of manipulating the euro to have a competitive advantage in exports; the United Kingdom that, rightly, is pushing for a hard-Brexit and abandon once and for all the “European socialist cage”; and ultimately China that wants to take the place of defender of world free trade.

France and the Netherlands are to hold general election that could sanction the European Union (EU) and possibly end the euro, in the event that parties of Marine Le Pen and Geert Wilders should be able to win.

As for Greece, on February 20, 2017, the Eurogroup will have to decide whether or not to unlock the next tranche of funding. And if it does not arrive, this time the default should be guaranteed. And here it could get the first political pressure from the United States which already on several occasions targeted Greece so that it abandons the euro and the EU. We’ll see.

The financial markets have witnessed for a few days a gradual weakening of the euro against not only the US dollar (USD) but also against the Swiss franc (CHF), something we believe to be the most incisive report to evaluate the current unstable situation, correlated with a renewed interest in physical gold. In Italy the spread is back in the 200 spots area, indicating a financial risk that considerably increased with performance well below the EU average and even its banking industry in the high seas. Therefore, it could lead to a fly-to-quality and risk-off full-blown movement.

The interesting thing about these days was an interview of a law professor who told the Financial Times, that the re-denomination of Euro sovereign bonds with any new marks (or drachmas or francs), couldn’t be prevented even by the CAC (Collective Action Clauses): “If a country decides to leave the only question is Whether you get a haircut with scissors or with a chainsaw”.

Finally, as already indicated in-depth in previous newsletters, March 15, 2017 will start the dance as the Netherlands will hold elections for its next Prime Minister with most likely front-runners Mark Rutte and Geert Wilders. We do not exclude that to block the rise of Wilders a grand coalition would take shape between the parties of the right and left.

So let’s begin, ready with popcorn!

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