Greece/Euro – Are markets heading for a crash on Friday?

This week has been full of optimism about Draghi & Merkel’s comments that they will do whatever they think they need to,  to save the Euro.

The markets have been up and the news has been positive that Europe is finally “doing something” to solve the crisis.

The good news seems to be based on the fact that the ECB will start printing money and that will solve everyone’s problems.

What the press is failing to report is that after Draghi made his statement the governor of the Bundesbank, Jens Weidmann came out and said  they would not support any money printing.

It it obvious that the bond markets are being manipulated. You only have to look at Germany’s debt auction failing, only for the next auction to lead the Germany getting paid to borrow.

So could the uptick in the markets this week also be down to manipulation?

Is the positive uptrend another tool to put pressure on Germany to loosen.

Is the US and the EU saying to Germany “look, this is what can happen if you loosen policy, things pick up, borrowing costs go down, Spain’s troubles disappear” etc etc.

This propaganda is awesome. For Germany to stay strong will take some real will power.

Of course the uptick is only temporary, the major banks are strong but they cannot prop up Spain indefinitely.

So why the precipice?

Weidmann is meeting with Draghi and Geithner this week and the markets are expecting Germany to loosen despite the fact that Germany have said they will not.

So given the markets are up this week, could a negative outcome from this meeting lead to the markets losing all the gains and crashing even further?

Given how optimistic the news has been this week even though there is nothing to back up the optimism I see no reason why not.

I fail to see any progress in the way the USA and EU want.

I personally can only see losses coming on any news out of Europe this week, if for no other reason than the gains this week have been based on nothing and that continued resistance by Germany will mean people finally understand that money printing is not going to solve the problems in the Eurozone.

How bad could it get?

It has the possibility to get very bad, I’m talking 10% drops in markets throughout Europe. Unless some sort of 180 degree change in philosophy happens in the Bundesbank this week and they decide to print then I see, at a minimum, markets giving up all their gains over the past week. And possibly much more with Spain’s borrowing costs going back up.

Get the latest updates in your inbox