| “Euro advances as debt concern eases before summit” alongside “Treasuries gain as Spanish rating cut spurs demand for safety”: two apparently contradictory headlines from the same news source (Bloomberg) reflect the market’s parallel hopes and fears about the euro rescue process. Rarely has opinion been so divided between those who see the euro’s future as bright, and those who see it as total failure. |
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| From the beginning, our own view has been moderately optimistic that a euro solution will be found, even though it is taking longer than we imagined. Our faith is based on the political will to save the euro, even if European politicians presently lack the energy to drive the process to its logical, and to us inevitable, conclusion of a degree of federalisation, lead, albeit reluctantly, by Germany. |
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| The new euro zone “federal” structure is still undefined, although some elements are appearing. The most significant is that Germany is begrudgingly accepting the need to bail out peripherals via some sort of centralised institution, but only if the final say remains with the German parliament. |