Macro Digest: Why the Franco-German Financial and economics Council tomorrow is interesting....

 

Considering this week-ends comments from: Lafontaine & Moscovici it will be interesting to follow tomorrows FGEC meeting:

 

The full link translatet and with reference to German version: http://f.hypotheses.org/wp-content/blogs.dir/981/files/2013/05/Lafontaines-U-turn-on-the-Euro.gif

 

The Economist: France and Germany – A tandem in trouble

 

Date	Press dates	Venue
Tuesday 2013-05-07 01:30PM	Franco-German Finance and Economy Council Participation by Dr Jens Weidmann und Dr Andreas Dombret Joint press conference with Dr Wolfgang Schäuble, Minister of Finance, Dr Jens Weidmann, Pierre Moscovici, Finance Minister of France and Christian Noyer, Gouverneur der Banque de France Contact: Press Division of the Federal Ministry of Finance, tel.: +49 30 18 682-3020, email:presse@bmf.bund.de

 

 

Clearly both of them talks to a domestic audience and Moscovici later admits "it's really a time delay more than a victory" – but combining Lafontaine and Moscivici leads to the conclusion that Germany will be under severe pressure going into the German election on September 22^nd to easy up on 'solidarity through austerity' as the political pressure continue to play a bigger and bigger role. This lack of politics ability to implement what is clearly needed: reforms and austerity with smarter use of public funds is simply stranded – leading us to think European growth will come down more than consensus. We do not buy argument "easing on austerity" helps growth in H2 as its about incentives. The private sector have ZERO incentive to increase investment into lower growth, high unemployment, scarce credit and total lack of believe in this working. Relaxing the austerity when it's about to bring results will be a costly u-turn for Europe – May be time to revisit Thatcher's famous quote: Youtube Ms. Thatcher

 

I see European growth on-route to -1.5/-2.0% vs. -0.5%  consensus

 

Strategy:

 

Less growth with or without the austerity – EURO soon to give up elevated levels as structural improvement via lower energy and improvement in housing & jobs creating US Dollar bull market via weak comparison to both Asia and Europe.

 

Short EURUSD from Friday 1.3062 – with stop loss above 1.3250.

 

Steen

 

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Economist

 

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