Recent press speculation has devoted a lot of time to the ‘end game’ which is approaching for Europe and the sovereign debt crisis.
A number of issues have arisen over the past few months with the most recent being the signals from financial markets that they are worried about the political leaders ability to take control.
Last week the main world’s central banks showed their solidarity in a co-ordinated action to lower interest rates for commercial banks. This action achieved its goal in that it immediately calmed nerves, however the euphoria will soon dissipate if the 17 Euro countries do not move forward.
The sovereign debt crisis, as it is described, needs long term plans. With their backs to the wall it is likely Germany, France and the remaining 15 ‘Euro’ countries will have to move into a fiscal union.
Fiscal union will probably require a new treaty with the 17 ‘Euro’ countries operating as a separate entity within the greater EU. The new inner EU will also likely have fiscal controls dictated by Germany in return for Germany’s commitment to help support their fellow countries and their huge debt burden.
In the long run it is difficult to predict how the EU will develop, however it is almost certain that there are no real alternatives to a common fiscal policy controlled by the strongest country, i.e. Germany.
In light of the lack of alternatives financial markets are likely to see a greater fiscal unity as a really positive move, one that offers stability and an opportunity for investment mangers to concentrate on their strengths which are spotting opportunities, and generating growth and income for investors.
I am well aware that the regular media updates can be confusing and alarming.
As always I would suggest any worried client to contact us immediately to discuss their concerns and we can hopefully offer reassurance and allay any fears. At the same time we can ensure that their savings, pensions and investments are well positioned for the future.