Monday, December 12, 2011

MIDF Research: Eurozone may not be seeing a lasting impact

KUALA LUMPUR (Dec 12): MIDF Research said the eurozone would not be seeing a lasting relief following the summit of European policymakers over the weekend.

MIDF Research chief economist Anthony Dass in a note Monday said he was fairly skeptical over the outcome although he acknowledged that there had been progress, but cautioned that there still remained inadequate satisfactory resolution over the debt crisis.

He also said that the Summit saw Germany as the clear winner, while UK was full of resentment.

He said the concern was whether the agreement would shift to treaty should there be lack of synchronisation.

'Risk of downgrading by rating agencies remains since it did not address the increasingly shaky banks or go far enough to shore up the euro-zone battered debt markets remains.

'What turned out to be a disappointment is when ECB remains as 'lender of last resort' to only banks not governments,' he said.

Dass said that ECB's lowering of its borrowing costs to lift the economy was limited in the near-term.

He said the other underlying concerns were possibilities for a change in the game plan as the fiscal compact are being put in place.

'Also, will the ECB be more dovish, now that fiscal austerity is supposedly taking shape? Could all these be a wishful thinking? Also they may fail to calm the tensions in the financial market.

'Risk of EU seeking funds from BRIC's cannot be ruled out and will be a slap,' he said.


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