Monday, January 28, 2013

Euro periphery draws back €100bn

Financial Times
January 28, 2013

Almost €100bn of private funds flowed back into the eurozone’s periphery late last year after action by the European Central Bank encouraged reinvestment in the crisis-hit countries.

The scale of the net inflows, equivalent to about 9 per cent of the economic output of Spain, Italy, Portugal, Ireland and Greece according to calculations by ING, the Dutch bank, highlight the revival in investor confidence in Europe’s monetary union after Mario Draghi, ECB president, pledged to preserve its integrity.

The return of capital has encouraged policy makers to believe the eurozone crisis is over, with Mr Draghi this month pointing to “positive contagion” in the region. The euro has also moved sharply higher.

Adding to evidence of a turn in sentiment, figures from the US Commodity Futures Trading Commission showed traders were last week more bullish on the euro than they have been in 18 months. Net long positions on the euro reached their strongest level since the summer of 2011.

However, the private inflows into the bloc’s periphery remain modest compared with far larger outflows earlier in 2012, when many financial markets feared a eurozone break-up.


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