What could go very right in Europe…

Will the Northerners fix the banking system this year and consider stimulus? Because if so, there could be a dramatic impact on the rest of the world…

via Eric Peters at wkndnotes:

Problems: “Germany is increasingly seen as part of the problem as opposed to the solution,” explained one of the mkt’s top strategists. “Europe’s internal adjustment is happening, they just need increased demand.” Unit labor costs narrowed dramatically across the EU in recent yrs, as peripheral wages declined and German wages rose. “If Germany can be persuaded to run a current account deficit, and stoke internal demand, the EU will explode – and Europe will become an engine for global growth.”

No Pain No Gain: “Draghi has to bear one more yr of pain, in exchange for decades of prosperity,” explained the investor. “The ECB position is very clear,” he continued. If govt’s allow the ECB a credible mechanism to close banks, forcing them overcapitalize and become transparent, Draghi will take care of the other problems. And will do away with banking fragmentation across Europe. So that an Italian manufacturer can fund at the same level as his German competitor. “And if that happens, Europe takes off.”

Keep an eye on banking union rhetoric from Brussels and Berlin and an ear out for the remarks of Signor Draghi.



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