Which trader will now dare hold assets in the Eurozone?

The killer question is this: are there still any serious counter arguments against the eventual death of the euro, and if not, why not sell up before it's too late?

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The eurozone is in the gutter. Who will touch it now?
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The Commentator
On 18 May 2012 05:16

The last few years have given many pause for thought about the risk-management abilities of our major financial institutions.

For us, that is in many cases unfair, especially where foreign exchange is concerned. The competence issue is a secondary or tertiary issue subsumed under the destined-for-failure euro project that traders and analysts have had to deal with. Socialist bureaucrats in Brussels (and in the EU member states) created vast complexities and problems which were not of the markets' making.

But we are where we are: and there can no longer be any excuses for institutions that fail to see what is inevitably coming. At the very second we publish this piece, the euro is trading at $1.2696 after Thursday's yo-yo style fluctuations around the psychologically important $1.27 barrier. Further such fluctuations may yet be in store. The question we have is: why?

Given the fact that Greece will have no functioning government for a month ahead of new elections; given that opinion polls in Greece suggest even stronger backing for parties that fundamentally reject austerity conditions imposed from the EU; given that Spain is in crisis again; and given that the new French Finance Minister has said that his government will not ratify the Fiscal Union plans “agreed“ in December and earlier this year, what problems could a rational investor be having in determining where we are going?

We suggest that in forming their forex strategy in relation to the euro, the financial institutions consider the following?

1) How would CEOs, analysts and traders justify continuing to hold any Greek assets whatsoever to their shareholders? Surely such behaviour would be a sackable offence, we submit.

2) That's moot, of course (or we hope to God it is). Given that practically no foreign financial institution now has significant assets in Greece, we repeat the same question (with the same prospective sanction) to any financial institution still holding assets in any euro zone country, with the possible exception of Germany and a couple of others – though no exceptions for Portugal, Spain, Italy and Ireland.

3) Now, pull back, be calm and see the big picture. Ask yourself this: Do you truly believe that the eurozone as it exists today will exist in one year’s time?

4) If, as we presume, many of you do not, why would you not immediately withdraw assets to non-eurozone countries such as Switzerland, Britain, and of course the United States?

The killer question is this: are there still any serious counter arguments against the eventual death of the euro, and if not, why not sell up before it's too late?

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