No resolution to EUR troubles

Euro zone Finance ministers gathered in Poland over the weekend – the hope was that a solution would be found to the Sovereign debt crisis, which threatens to bring an end to the single currency. However, yet again another meeting of European leaders only managed to create panic in the markets.

Timothy Geithner, the US Treasury Secretary, joined the Euro zone ministers at the meeting in Poland and stated: “What’s very damaging is not just seeing the divisiveness in the debate over strategy in Europe, but the ongoing conflict between countries and the [European] central bank.” His speech was met with anger by some ministers – Austrian finance Minister, Maria Fekter, said that she found it peculiar for the US to tell the Euro zone what to do whilst their economic data was significantly worse. However, the problem is that the spotlight is firmly on the Euro zone at the moment and until credible actions are seen as being taken by the leaders of the Euro zone, then pressure will remain on the economic area – not just from the US, but the financial markets as well.

If the Euro zone is to survive then each country will have to make sacrifices. The problem is that the German public are revolting against any further bail outs, as shown by Angela Merkels defeat in a sixth regional election out of seven. Meanwhile, in Greece there is due to be a round of protests today over the increasing of property taxes.

The decision on whether to release the next tranche of the bailout fund was delayed until October at the meeting, as some ministers questioned whether Greece had done enough to deserve the additional funds. The problem with this hard line approach is that it pushes Greece closer to leaving the Euro and defaulting.

With very little economic data released today, the Euro is likely to remain under pressure, meaning Sterling and Dollar strength can be expected. The big risk to Sterling weakness this week will come on Wednesday with the release of the Monetary Policy Committee minutes which will reveal the latest pattern of voting and how likely further QE in the UK is.