From a market standpoint, it's hard to argue that the Greek elections were anything but a disappointment. If anything, the declining euro and rising bond yields point to skepticism that the new government in Greece will have no more luck implementing cuts than the old one. And yet, had things "gone the other way," the dialogue would be even worse. This is according to Marc Chandler, Chief Currency Strategist at Brown Brothers Harriman, as he acknowledges the latest instance of rapidly dissipating hope. But, he argues that things are changing if you look closely.
"I think what is happening, is the EU is really coming along," Chandler says in the attached video. "They're offering Greece all kinds of incentives right now," including concessions like offering lower rates, more money, or as much as two more years to meet fiscal targets.
While all of this "chatter" remains unofficial and is mostly the stuff of media reports, Chandler points out the high probability that there will be some back peddling on austerity, given the current state of affairs in Greece and an economy that has already been contracting for five years.
Even so, he's bracing for at least a few more months of Euro vs. Dollar weakness, perhaps another 5% down to ''just below $1.20" by the end of September, before rallying in the fourth quarter.
But that's not all. Chandler's really big call for 2012 is for the Euro Summit to wrap up the year with a big regional push for unification.
"Banking union, fiscal union, political union," Chandler predicts, not only replacing the debate that once focused on the creation of Eurobonds, but eclipsing it with something even bigger: "The formation of a roadmap that will lead a greater United States of Europe."
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