Greek bailout tranche received, now it’s the Italian Job

The Euro continues to fall today amid a shifting spotlight that now focuses primarily on Italy, although other struggling countries help to share the burden.

Some economists, according to the media have already began to write off Greek debt – admitting that they are extremely unlikely to pay it off and are now focussing on suring up the most indebted nation in the zone – Italy. If a Greek bailout could have very serious effects and a Spanish bailout could be monstrous then what of the Italians? Well to put it quite simply Italy have been the nation that has managed to avoid the spotlight very well of late, but it is behind only Germany and France respectively as the biggest economy in the Eurozone. Much like the tiger lurking in the bushes it poses a quiet but very, very serious threat to the euro and indeed the global economy as a whole..

Borrowing costs in Italy (along with Portugal and Ireland) hit record highs on Friday and it seems that this has had a knock on effect of concern on stress tests of Italian Banks that are due later in the week as the Euro suffers again today against both the USD and GBP. There are also murmours that the European Bailout Fund may have to be doubled in order to potentially deal with an Italian collapse. All in all it seems speculator’s faith in the EUR is being tested. We all know the classic Italian Job cliffhanger ending, did they make it?… Will they this time? Call me an optimist but I think they will at this moment in time, but this is not by any means a definite. If any of the other nations (and the others will feel the strain more seriously than the Italians are now) are forced to default then the fear is that like a chain of dominoes Spain and Italy could follow suit, with a rather resounding crash. This is the eventuality that everyone, (especially if you have your funds in Euros!) wants to avoid.

With Euro rates falling a rather staggering amount over the last few days (0.6% vs GBP today and 1.6% vs the USD), I think we are seeing a sign of things to come. Put quite simply most of the Brokers in my office have been stating that the Euro is overvalued for some time now and it seems this is something finally being realised by the markets. It is also worth noting that this European weakness proceeds an Interest Rate hike only two working days ago!

As far as a forecast goes I actually don’t think the Euro is likely to go too much further in the short term, but these fears are moving from country to country as an almost daily occurence. Even though interest rates are likely to underpin the value of the Euro somewhat I think we will see Euro rates tumble in the next few months as more and more information is revealed about what a state some European countries are in. If you are looking to exchange funds in this time, try to make sure that you have moved before this happens. If you would like a more detailed chat about your requirement for free with the author of this article then please do not hesitate to contact me by calling this number and asking for James Matthews 0044 1494 787 451.