Trading a Euro Recovery

If the €600 Billion IMF loan to Italy that has hit the press goes through, Forex traders could be trading a Euro recovery. The markets, Forex, stock, and commodity, have been whipsawed for months over the European Union debt crisis. It almost seems that every proposal to deal with the debts of the Southern tier nations of Europe is too little and too late. Speculation is rife that if Greece is unable to pay its national debts it will separate from the EU and wind up using a new version of the drachma. Likewise, if Italy defaults on its debts it would be using the lira again.

Many have forecast the demise of the dream of a European Union as no one seemed to want make the hard choices and provide sufficient guarantees to continue the solvency of many nations of the EU. It should be mentioned that just as the debt crisis was getting up a head of steam the head of the IMF, Strauss-Kahn was arrested in New York on allegations of a sex crime. His subsequent release based upon questionable charges did nothing to put the man considered the coolest head back into the picture of the debt dilemma just when he was needed. Now, despite this long, sad story, we could be trading a Euro recovery.

If the EU debt dilemma does finally come to a resolution will the Euro just pop up in value? If so, how high will it go? How much money will one be able to make trading a Euro recovery? Currency values are determined by a large number of issues including employment, industrial production, central bank policy, and politics. This last issue may have been the most important in the near demise of the EU. The hard choice for many nations of the EU has been to give up local independence in return for membership in a greater whole.

The EU was founded in order to increase economic prosperity but also to prevent the political divisions that lead to two horrific wars in the first half of the 20 th century. Along the way economic issues have always been easiest to come to agreement on. Local politics are something else. It is all too true, and sad, that local politicians often buy votes with promises and when those promises cost money they need to be paid for. That is the dilemma across the Southern tier nations of Europe and with the nations of the North. It is the issue that will determine if in the coming months we are trading a Euro recovery or not.

In the end who pays for social programs in Greece, Spain, Portugal, and Spain? Is it the locals or is it taxpayers in Germany, the Low Countries, and France? In trading a Euro recovery traders are well advised to keep in touch with the politics flowing in and around the decision makings as voters in Frankfurt may, in the end, be able to veto help for folks in Naples. Likewise, areas of stubborn unemployment in Southern Italy could end up being the wards of workers in the Ruhr Gebiet or port of Amsterdam.