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  • EU’s Coming SRM Deal: 10 Reasons It’s Bearish For The EUR, Europe

    From fxempire.com

    The EU’s SRM banking pact to be finalized December 18: new beginning, or beginning of the end? Part 3 of 3: Conclusions: A Giant Step…To Nowhere In our weekly fxempire.com analysts’ meeting, in which we share thoughts and conclusions about the weekly outlook for global equities, currencies, and commodity markets, we noted that the results for past week’s Euro group and ECOFIN meetings’, which hammered out all but a few final details of the SRM deal, were far too underreported relative to their importance. The following is part 3 of a special feature on the coming a single resolution mechanism (SRM – get ... (full story)

euro will come it,s end
Quoting samooh
euro will come it,s end
odds are yes, eventually
won't happen until member states asked to truly give up big chunks of sovereignty ie real control over banks, or real cash

note how under current terms the central 'resolution board' really has only a veto power, and even that can be overridden
Euro will go up or down any body explain here?
Quoting loveall3322
Euro will go up or down any body explain here?
NEAR TERM if SRM deal finalized next week expect some kind of short term boost to move higher for the EUR, after all it IS a step in the right direction, tho more show than substance,

market might agree with me and see the deal is insufficient, and EUR sells off

but given that current EUR trend is higher, markets more inclined to have bullish bias and look on the bright side

within a few days tho EUR returns to moving with usual drivers


longer term is setup for pullback when
Base on the news? Probability speaking, down. Looks, euro is overvalue agree? IMF say so, OECD say so (they are neutral institution, so i rather trust them). Why market keep buying? Foreign investors (China, Japan, Middle east), in order to escape US "sick theatrical shutdown". Do they like to see their investment plunge? NO. Euro will have a lot of support, and they will eventually get through their problem. Then, only then, they devalue to acceptable level gradually. I guess ahead will be turbulence for euro, as retail trader, we try to take advantage of it.
Don't blame the tools. Blame the carpenter.
Paradoxically, SRM deal may help EUR because banks need build up cash
watchin sovereigns buy EUR to escape USD is like watching them jump from kettle into the fire

USD has problems no doubt but they're mostly self inflicted by Washington's choice
EUR has deep fundamental flaws from flawed currency union - very unclear if they can fix:
would Germany really risk ceding possible control over its destiny to group of French and Italians, or would they accept authority of group led by Germans and Dutch? dunno

cultural divides are significant - keep them from committing real cash or power transfers to central body

In contrast most Americans feel need/connection to Federal government - not so sure French or Germans can transfer loyalty to Brussels. Especially given their much deeper cultural and language differences - never mind history of wars
and no one likes to give money away to strangers,

we will have volatility tho, right on that
I'm embarrassed for you. Post the article, don't then spam it.
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
  •  Guest
  • | IP XX.XXX.19.117
What would happen if they don't finalize the SRM deal on Wednesday?
  •  Guest
  • | IP X.XX.141.223
EU banks full of crappy GIIPS bonds, if ECB stresses them they'll have to assume 30-50% write downs on those bonds, heck Greek bonds lost over 70-90% in so called 'voluntary haircut'
  •  Guest
  • | IP XX.XXX.39.138
I wonder if German bonds would do well given that EU residents have few safe places for their money with bail in rules
  •  Guest
  • | IP XXX.XXX.90.100
why can't rest of nations ignore German requests for once?
  •  Guest
  • | IP XX.XXX.89.106
they create a central authority but it has no power, they create a fund but it will take 10 years to fully fund
Quoting Guest
What would happen if they don't finalize the SRM deal on Wednesday?
unlikely to move markets if that happens because they still have a few weeks before their December 31 deadline (self imposed)
the 'hard deadline' is end of April, because after that EU parliamentary elections likely mean a long (like ~9 months) delay before EU even has chance at a new SRM deal

no SRM, no ECB stress tests
no ECB stress tests, no progress on bank resolution or unified supervision
(granted, the current draft is far from providing either a robust backstop for banks or for strong central banking supervision that can act fast

still, failure to even get a weak SRM done suggests EU can't reform itself. Unlike US it doesn't have as much time given its vulnerability to new banking or sovereign debt solvency issues
Quoting Guest
why can't rest of nations ignore German requests for once?
because who else will cover the German share of EU costs
he who pays the piper...
Quoting Guest
they create a central authority but it has no power, they create a fund but it will take 10 years to fully fund
true but still a step in the right direction and also a precedent on which to build

for example once they have a bank resolution board, even it it only has veto power, then it's easier for the EU at a later time to just transfer more power to that board if their treaties are written right.
You're one sad troll, how many cents on the dollar do you get for a click? You have my pity, desperate times/desperate measures...
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
Quoting Spreadbetter
You're one sad troll, how many cents on the dollar do you get for a click? You have my pity, desperate times/desperate measures...
Lol I don't get it. Why is he being a troll, from what I can understand/have read, he seems to be speaking the truth.
He writes an article for a website that no one is interested in visiting, then puts up a link here, then has conversations with himself to generate interest and clicks, its sad and embarrassing. He should just post up the link, then have some pride and dignity and stfu is the way to do it. Marctomarket has it right; post and take a step back.


Quoting sliqdaddy91
Lol I don't get it. Why is he being a troll, from what I can understand/have read, he seems to be speaking the truth.
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
what happens if suddenly a bank needs more money than the bail ins + national fund + common SRM fund have?
Quoting Cliff Wachtel
true but still a step in the right direction and also a precedent on which to build

for example once they have a bank resolution board, even it it only has veto power, then it's easier for the EU at a later time to just transfer more power to that board if their treaties are written right.
Well Cliff, if banks that are in trouble can steal depositors money (like Cyprus), how happy do you think anyone with money will be to keep their money in a bank account? Seems to me like this fact alone should be able to kill the banks and the union. It surely seems less like a step in the right direction than a desperate attempt to hold a crashing union together. Maybe I am missing something here.
Quoting Spreadbetter
He writes an article for a website that no one is interested in visiting, then puts up a link here, then has conversations with himself to generate interest and clicks, its sad and embarrassing. He should just post up the link, then have some pride and dignity and stfu is the way to do it. Marctomarket has it right; post and take a step back.
nope: only comments I post have my name behind them and purpose is to elaborate or respond to question

learn what you can from that
Quoting wlarimer
Well Cliff, if banks that are in trouble can steal depositors money (like Cyprus), how happy do you think anyone with money will be to keep their money in a bank account? Seems to me like this fact alone should be able to kill the banks and the union. It surely seems less like a step in the right direction than a desperate attempt to hold a crashing union together. Maybe I am missing something here.
yes, its huge and the original PSI (private sector involvement or something like that) used for the Greek 'voluntary' haircuts of 70%-90% (don't remember what it ultimately came to) were what got Italian yields popping back then

you're not missing anything - you're right. my point was that they HAVE made a start and do seem to be ready to have some kind of common fund and incremental loss of authority.

Does it look like it's enough. No way. I was trying to present as fair a picture as I could, given that I'd gone into detail about the flaws of the current draft, I just wanted to acknowledge that the deal does make some progress (granted, inadequate)
Quoting Yali Lev
what happens if suddenly a bank needs more money than the bail ins + national fund + common SRM fund have?
short answer: unclear
rest of Europe wants ESM ( a fund for sovereign bailouts only) to be tapped in an emergency, but Germany (surprise!not) opposes as it wants to limit easy access to common EU funds (and limit its taxpayers' burden as they pay the biggest chunk).

so there is no clear answer at this time
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  • Story Stats
  • Posted: Dec 15, 2013 5:13am
  • Submitted by:
     Cliff Wachtel
    Category: Fundamental Analysis
    Comments: 23  /  Views: 5,082