Spanish stand off?
Source: BNY Mellon , Author: Neil Mellor
Posted: Mon June 11, 2012 11:52 am

INTERNATIONAL. In a week in which the Spanish government appeared to raise the ante in its standoff with its EU partners, there was a derived sense, in some quarters at least, that Spain’s gamble might just work.

Unfortunately for Spain, however, there has been no genuine evidence as yet that Germany is at all willing to cede ground in its opposition to direct EFSF funding of the country’s banks, and in fact the same can be said of Germany’s position on a range of issues. Recall, for example, Merkel told her party faithful last Sunday that “under no circumstances” would she agree to German-backed Eurobonds.

However, this is not so say that the week has been devoid of any breakthrough: the FT’s headlines on Thursday suggested that some sort of bailout may yet be extended to the Spanish and extended with such limited conditionality that it would allow the sovereign to accept the deal ‘with honour’.

Whether the story holds water and whether the Spanish would accede to such a plan remains to be seen of course, but then, in view of a more widespread recognition of the fundamental, structural problems afflicting the Euro-area, it is by no means certain that even this action would do anything other than temporarily mitigate market doubts over the region’s stability.

The story may well evolve over the coming week of course, but then, there is also the small matter of next Sunday’s Greek general election looming over the market.

With polls suggesting a neck-and-neck race between Syriza and New Democracy, there is every chance that the outcome will closely resemble its most recent predecessor – resulting in a similar stalemate and a similar debate as to Greece’s future in the Euro-area.

Note: This is the latest Weekly Preview by Neil Mellor,  Currency Strategist at BNY Mellon.

 

 

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

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SAUDI ARABIA. The manager/directors of any company that is incorporated in Saudi Arabia should start to consider what changes may need to be made to the company's articles of association or bylaws.
UAE. There are more negative than positive factors likely to impact oil prices in the short term. With current oil net-long speculative positions at an elevated level, a slight change in traders' outlook would lead to a significant selloff.
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