Asia at the head of the Euro: A welcome respite !
In a way that demonstrates how countries outside Europe are concerned by the evolution of the European currency and its faltering economies, China and Japan have taken public initiatives which indicate that the fate of the Euro does not indifferent. There are even rumors of intervention in the form of bond purchases could come from the United States.
Admittedly, this is not a purely altruistic act, even if, contrary to what the cynics think, there is a real sense of solidarity between nations in times of crisis. At the opening of European markets, the statement of the Bank of Japan are intended to subscribe to 20% of the bonds placed on the Irish market had the effect of stopping down the Euro, and avoided what would have could be a black day both on the foreign exchange markets as the stock and bond markets. For now, the yen supports the entire weight of the two currencies weakened, the dollar and the euro.
Few months ago, China had announced its intention to subscribe for Greek bonds for 3 billion euros. She has repeatedly reaffirmed its support for Euro. Major investor in government bonds, China represents a real support capability.
On the Asian perspective, the weakening of the euro is bad news. The arrival of the European currency was indeed a major breakthrough for Europe, but also constituted an alternative to the dollar as reserve currency. All Asian central banks have not only U.S. Treasury bonds, but bonds of European countries. A collapse of the Eurozone would destroy this alternative in that currency bonds of the States of the Eurozone would have neither the size nor the liquidity requirements. For Europe, it would mean higher costs of funding.
Moreover, Asia "gate" the resumption of economic growth around the world. If Europe is weakening, this burden is increasing: in fact, the Europeans may no longer be buyers of Asian products and it would threaten their own export industries. Suffice it here to think of Japanese cars that are hitting Europe.
Yesterday was a day of silence at European level. The action was located in the countries concerned and the European Central Bank bonds issued by Portugal were swallowed by the ECB. This is not healthy and dangerous long-term. This is especially a risky precedent. However, the ECB could not sit back and let the panic spreading.
In these circumstances, the situation in Portugal is the central concern: Portugal do not ask for help because he will not accept conditions that accompany such aid, namely a policy of austerity. Angela Merkel, the German Chancellor, said it was in Portugal to decide and not the European Union. The Irish had "kept" two months ...
The greatest danger now lies in the quality of banks in the countries concerned. They lost their notation following that of their country of origin. Added to this is that states are desperately trying to refinance with their own banks already weakened by the crisis.
To strengthen confidence, the only cure is a new stress test for European banks, but with a more robust test than the previous which had reassured that policy. The banks are not there to support their governments to the detriment of their own strength. If this trend continues, some banks are likely difficulties of financing the domino effect would be fatal to the European banking system.