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Make or Break for the Eurozone?

Lots of important things have happened in October. The stock market crash of 1929. The launch of Sputnik 1. The opening of the Walt Disney World Resort. And now October is the month which could either mark the beginning of economic recovery in the Eurozone or see the currency bloc crumble.

Given the recent unrest in struggling nations Spain and Greece and with investor sentiment on the decline, the pro-austerity bloc will be urging Eurozone leaders towards a more hard-line approach in tackling the debt crisis.

Today talks between the Greek government and the nation’s international creditors will resume, next week European finance ministers will meet to discuss the bond buying plan and the issue of legacy assets while later in the month the first of three ‘crucial’ summits will take place.

In Athens the hours ahead will see the ‘troika’ of international creditors meet with Greece’s Finance Minister Yannis Stournaras and Prime Minister Antonis Samaras in order to continue with their drawn out assessment of the country’s creditworthiness. At the close of last week Joerg Asmussen, Executive Board Member with the European Central Bank, argued that when it comes to Greece ‘there could be additional need for external financing’.

During the summit arranged for October 18th/19th Eurozone heavyweight Germany will lay out a plan to substitute EU infrastructure subsidies with a common budget which would aim to aid indebted nations on a conditional basis. It has been reported that the so called ‘common budget’ could be funded by European taxpayers.

Although the common currency rallied by 4.4 per cent following the ECB’s announcement of a bond buying scheme, optimism has faltered in the wake of disappointing data releases and general unrest. As a result of flagging confidence the Euro has experienced two weeks of declines against its American counterpart. Clemens Fuest, an advisor with the German Finance Ministry, commented: ‘People are beginning to look at this in a more sober way […] I don’t think we’re moving towards disaster, but it will become increasingly clear that regaining competitiveness will last a long time for these countries.’

Whether or not Spain will request a bailout has been a cause of concern for investors and this concern was heightened by both the protests in Madrid and the news that Catalonia (Spain’s largest regional economy) could seek independence. Over the weekend pressured Spanish Prime Minister Mariano Rajoy implored the nation to unite and for nationalists to stop impeding efforts to fight the crisis. During a rally in Spain’s Basque region Rajoy stated that: ‘The worst that can be done about the economic crisis that we are in at the moment is to break economic stability. [Nationalists are causing] more problems for people than we have at the moment, as if there weren’t already enough’.


The Pound to Euro exchange rate is currently trading at 1.2541

The Pound to US Dollar exchange rate is currently trading at 1.6150

The Pound to Australian Dollar exchange rate is currently trading at 1.5571

The Euro to US Dollar exchange rate is currently trading at 1.2873

The Euro to Pound exchange rate is currently trading at 0.7971

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