When to sell the euro(zone) | FT Alphaville

When to sell the euro(zone)

Here’s something to ponder as we await details of a Greek bailout.

It’s a currency recommendation from analysts at BNP Paribas:

Helping Greece is one thing, but when Greek paper benefit from other EMU countries underwriting its debt, will the market then not ask for Portuguese and Spanish debt to be given similar guarantees? Our view is that an EMU wide solution will be required while a Greek specific solution will make the market only concentrate on its next ‘victim’ which would be Portugal. A Greek specific solution will make us sell the EUR immediately. In the case of today’s European Summit producing a comprehensive European solution the EUR will have short-term upside potential.

It rather hits the contagion issue on the head.

Speculation is of course not the fundamental problem here, but there’s no denying that the market is on the look-out for the next area of potential eurozone weakness.

European Central Bank members and government ministers thus have a doubly-difficult task: fix the Greek problem without diverting any attention to countries like Spain or Portugal.

Let’s see if they can do it.

And while we wait — a eurozone expression of ‘support’ is expected to come on Thursday, but details of an actual bailout plan aren’t anticipated ’till Friday — here’s some selected reading:

Germany’s choice – STRATFOR
Bailout may leave currency speculators nursing losses – The Guardian
Medicine for Europe’s sinking south
– Nouriel Roubini and Arnab Das
Europe needs to show it has a crisis endgame
– Wolfgang Munchau
Europe decides what union means
– FT editorial comment
A Greek crisis is coming to America
– Niall Ferguson
Nowotny talks contagion, exit strategies and all things peripheral – FT Alphaville interview
Greek financial debacle threatens Swiss banks – Credit Writedowns
Super-wealthy investors move billions out of Greece – The Guardian
Video: Stiglitz and Hendry debate the Greek bailout – Credit Writedowns
How Brussels is trying to prevent a collapse of the euro – Der Spiegel
Don’t leave Greece to face the speculators alone – Joseph Stiglitz