Tuesday, 24 February 2009

DAX index breaks below November low

The DAX index in Germany has now clearly taken out its lows from last November as has the CAC40 Index in France, although the UK’s FTSE still has some distance to go. It is worth pointing out that the German index still remains substantially above its 2003 lows while the FTSE could more easily revisit its 2003 lows and that is what I am expecting.
Meanwhile the problems I have alluded to in Eastern Europe continue to worry the bankers of western Europe.
Commercial banks in Germany’s immediate neighbor Austria have lent almost $300 billion to Eastern Europe, which is more than 70% of Austrian GDP. It has been estimated that even a 10% write-down could bankrupt the Austrian financial system. Meanwhile policymakers within the EU struggle with concerns emanating from the most troublesome eurozone economies - now becoming known as the PIGS i.e. Portugal, Ireland, Greece and Spain.
It is becoming uncomfortably likely that this could end in tears for the technocrats in Brussels.

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