Positive euro trading due to Monti’s proposed austerity measures worth over 30billion euros

As a result of trading in the Asia-Pacific region today, the euro opened the week on a high. This positive trading of the euro was due to the austerity measures proposed yesterday by Italian Prime Minister Mario Monti, which were aimed at strengthening the country's strained public finances. The proposed measures dubbed the ‘Save Italy’ package have been approved by the cabinet and are to be presented today to parliament. The €30billion package of austerity measures will be a culmination of tax hikes, pension reforms and growth incentives; there will be an increase in VAT, a new property tax which is hoped to generate over €10billion, a tax imposed on luxury items such as yachts and an increase in the pension age along with a concerted effort to avoid tax evasion.

The week ahead of us promises to have a significant impact on euro trading as there are meetings scheduled on Thursday and Friday where all EU leaders are to meet to agree on further reforms for the EU bloc. This week, which has been named ‘a make or break’ week, will begin with Merkel and Sarkozy meeting today to further discuss a stability pact and to introduce potential changes to the EU treaty. Similarly, rumours that the ECB is to boost IMF funding is also likely to result in positive trading in the EU today.

Monti’s package has so far been well received in the Asia-Pacific region and is expected to flow through trading in the Eurozone today. Assuming the package is not dubbed a panacea to a growing debt crisis, we should see an improved outlook on the debt crisis which is impacting on the third largest economy in the bloc.

Economic Data 

  • German, EMU and UK PMI data 
  •  EMU retail sales 
  • US ISM Non-Manufacturing data

The week ahead will be incredibly volatile based on outcomes of EU leaders. We are all crossing our fingers this week and hope to see some positive solutions implemented to boost the euro and see some further steps in solving the on-going debt crisis!

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Instituions named in this article:

ECB: European Central Bank- The institution of the European Union (EU) which administers the monetary policy of the 17 EU Eurozone member states.

http://www.ecb.int/home/html/index.en.html

IMF: The International Monetary Fund - An organization of 187 countries, aimed at fostering global monetary cooperation, secure financial stability, to promote international economic cooperation, international trade, employment, and exchange rate stability.

http://www.imf.org/external/index.htm