Eurozone has ‘big heart trouble’ with ‘Macron’s hens coming home’ | City & Business | Finance
Julian Jessop also suggested that “the hens were coming home to roost” for Emmanuel Macron’s France, while he also said that Germany, led by Chancellor Olaf Scholz, was now “the sick man of the Europe”. Mr Jessop, who is the former chief economist at the Institute of Economic Affairs (IEA), where he is still an economics researcher, told Express.co.uk, commenting at a time when the euro was trading at par with the US dollar. – its lowest level for two decades.
He said: “There are really big problems at the heart of the eurozone.
“There are two in particular. One is the weakness of the German economy, which has actually been the sick man of Europe for some time. It’s really difficult.
“The other is the high level of debt in countries like Spain and Italy, so that familiar problem I think will come back, especially when the European Central Bank raises interest rates.
“This will put a lot of pressure on the finances of southern European countries.
“So wherever you look in Europe, there are problems. Hens also return to roost in France. The fact that they had to nationalize EDF, the energy company, because the government practically wiped it out as the majority shareholder and now had to take everything on board.
“It’s not great for French taxpayers.”
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“A lot of currencies are weak against the dollar, including the euro, the yen and the pound. So it’s mainly a story about the United States and the strength of their economy and also the fact that their central bank is going to raise rates more aggressively than other central banks.
“So when people talk about the pound crisis or the euro crisis, I think they miss the fact that it’s mainly about the strength of the dollar.
“Looking ahead, however, if I had to guess which currency will be the worst, I would definitely say the euro.
“There’s a lot of bad news that’s priced so high that almost everyone is pessimistic about the UK economy and worried about political risks, Brexit and all that sort of stuff. So that’s already taken into account.
“You have to ask ‘where’s the surprise?’ I think the surprise is that the UK economy will hold up better than people expect and will continue to do so given what we have seen today.
The euro plunged to $0.9998 against the dollar today (Wednesday, dropping below the $1 level for the first time since December 2002, before bouncing back to the last trade at $1.0023.
Commenting, Thanim Islam, market strategist at Equals Money, a specialist in international corporate payments, said: “The data showing that economic sentiment in Germany has fallen to its lowest since 2011 has been largely ignored by markets as the EURUSD rates are hovering around parity.
“Euro buyers and FX options defended the big psychological mark with EURUSD rates climbing 0.7% at the high of the day as we edged closer to parity in the morning.”
He added: “This morning’s inflation data from Germany, France and Spain all fell in line with expectations and remained the same as the previous month at 8.2%, 6.5% and 10, 2% respectively.
“We continue to keep an eye on this level of parity against the US dollar and see if there are any market participants willing to defend it. US inflation today could well have a significant impact depending on its result.