The boost to sentiment following Germany’s approval of changes to the EFSF bailout fund was brief.
Although the outcome of the vote was not particularly surprising political concerns were assuaged by the fact that Chancellor Merkel secured support from within her coalition. Markets were also helped by a bigger than expected drop in weekly US jobless claims but this also failed to provide a lasting impact.
The bottom line is that there is still a huge degree of scepticism on the ability of policymakers to resolve the crisis in the eurozone periphery while growth worries have not receded. Even the approved changed to the EFSF bailout fund are increasingly being seen as old news given the view that it will need deeper changes including ‘leveraging’ it up.
to read more, visit Mitul's ever excellent blog at http://econometer.org/2011/09/30/waiting-for-a-solution-to-europes-crisis/
Mitul Kotecha works in Hong Kong for Crédit Agricole Corporate & Investment Bank, where he is the head of global currency strategy.
He is the author of the forthcoming ''Gyrating Currencies'' to be published by Searching Finance in February 2012.