by Jonathan Davis
Financial Times
December 4, 2011
The eurozone crisis is proving to be a wonderful political drama, with the most essential of all ingredients, as with all good drama, that the potential consequences of different outcomes are so serious. There is almost nobody in Europe, and increasingly beyond, who has not by now worked out that they stand to be adversely affected in some way or another, especially if the worst of all conceivable outcomes materialises. The fallout has reached capitals and markets all round the globe, from Washington to Beijing.
A few days in Amsterdam last week provided plenty of anecdotal evidence of how widespread the fear of imminent disaster has become, even in one of the most sensible and securely financed of all European countries. Some advisers at Dutch banks have, according to one first-hand account I heard, been advising their clients to sell all their stocks in the search for safety – one reason no doubt why German one-year bunds at one point last week were priced, for the first time ever, to give a negative yield.
The rumours which spooked the markets about a leading European bank being in danger of failing were also widespread. There may, or so I heard from one apparently reliable source, be another major rogue trader scandal in the offing. The view that Europe is already in recession has spread far beyond the orbit of professional investors. Few seem to have any faith in the ability of Europe’s political leaders to stop the rot in the eurozone.
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