Drachma in the bucket: Secret list of "who really has power" in EU

Submitted by Greg Fossedal on Tue, 06/07/2011 - 12:39pm

So there we were, Monday, speculating about a U.S. and global "policy overhang" dragging down what should be the market's summer ebullience... and into Washington, DC comes German Prime Minister Angela Merkel for a joint press conference with President Obama.

The two heads of state handled a variety of issues, but their comments and answers made it clear they are in relative agreement on the Greek debt meltdown.

Message to markets:  The U.S. wants Germany and the major EU players to deal with the Drachma Debt crisis -- and Germany will be happy to do so.

The markets responded, with a modest U.S. rally in the morning following on a mixed result for the day in Europe, where markets are already closed.

Within Europe, the rebound was concentrated in the EU's largest and politically powerful... those who will be able to insulate themselves best from the Greek tragedy. Indeed, a glance at the day's closings gives you an almost mathematical reading on who has power in the union:

THE EU-POWER HAVES:
Belgium     + 0.20 %
Germany    + 0.26 %
Italy            + 0.24 %
France        + 0.22 %
Britain        + 0.03 %

THE EU-POWER HAVE-NOTS:
Austria         - 0.11%
Norway        - 0.32 %
Sweden        - 0.50 %
Switzerland  - 0.60%
(non-EU)

This is suggestive evidence, at least, that many global investors are attuned to political-policy events in Europe and the U.S. The modest Italian differential is particularly signifiant in this light, given its proximity to Greece. Good news, Milan: The market considers you on the EU powerlist.

That's one policy drama being resolved, another 4-5 to go. It's another reason (as if more were needed) for investors to keep their head and wait patiently while the global elite -- Bernanke, Boehner, Obama, and the rest -- try not to mess things up too badly.


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