This Euro Weekly Price Forecast is an in-depth analysis of the likely ramifications of the present financial crisis. Following a global recession, a drastic change in consumer spending patterns, and a burst of sovereign debt, the European Monetary Union (EMU) is now finding itself on the edge of an abyss. I discuss how this is unlikely to end well.
Whether or not we are witnessing a major paradigm shift in the way that the world functions is highly doubtful. It has been all too clear that the EMO has been transformed by the creation of its banking union; a form of supervisory association. Although this consolidation of political control over the economies of the single currency area may be a positive step, it will only be of limited value if it does not produce market equilibrium.
Markets tend to reach their equilibrium quickly, with no apparent reason for this occurring; perhaps because the trend line indicates a break in the direction of the equilibrium. This most recent situation is extremely alarming as the EMEA (European Market Area) is currently experiencing a crisis with its bank interconnection problem.
At this stage of the market equilibrium process, I believe that EMEA banks need a bigger stimulus package to stave off a crash. In such a scenario, it is difficult to see a way out of this pending collapse.
However, for the time being the story is that the EMO is on the brink of falling apart; a situation that is likely to have many systemic consequences. This failure of the EMU banking union is a very serious topic. Over the coming days, I expect that the media will turn its attention towards the crumbling Europe.
However, in the current market equilibrium, an external shock (such as the EU crisis) cannot be avoided. Despite many efforts at consolidating the EMEA monetary union, a real risk of a crisis could not be avoided.
This could eventually lead to the collapse of the market equilibrium and a financial meltdown. This is the final consequence of the current Eurozone crisis and it is something that I look forward to discussing further.
Given the current level of market equilibrium, I believe that there are some sensible things that both the Eurozone and the EMEA can do to avert a crisis. For the moment, both parties have achieved their objectives, but in the long term, I see these goals as mere delaying tactics.
Recent polls have suggested that public opinion polls may even be in favor of breaking up the Eurozone. This is definitely surprising as most people were expecting a definite rejection of the idea, but what is the explanation?
The fact that the masses are responding to popular demand is certainly encouraging. If these people think the idea of breaking up the Eurozone is a viable solution, the party that holds the power is going to have to accept it.
Following this latest analysis of the Euro Weekly Price Forecast, the short term prospects for the Euro are poor. However, the problem of non-convergence is growing. With public demand increasing, I believe that the pressure on the political elite to come up with a solution will grow.