Wednesday, August 1, 2012

Biggest dangers hiding in plain sight

by James Mackintosh

Financial Times

July 31, 2012

Markets can be single minded to the point of obsession. Little matters other than today’s meeting of the US Federal Reserve and Thursday’s of the European Central Bank. Either could offer a short-term boost; but neither is likely to provide more than temporary balm for what ails their economies.

Meanwhile, investors are ignoring at least three major problems of which they are well aware. The most immediate is Greece, which has simply been screened out since its election last month. Market focus moved on to the more important problems of Spain.

Yet Greek cash reserves have reached “almost zero”, its deputy finance minister says, and it has to repay €3bn to the ECB in three weeks. Fractious politicians are still resisting cuts demanded by international creditors. Yet investors simply assume the eurozone will hand over more money.


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