Hamish McRae: Unlike politicians, the markets are seeing sense

Hamish McRae
Sunday 30 October 2011 23:49

It is strange, isn't it? The markets are being more adult about all this than the politicians. The mass of conflicting stories coming out of Brussels have, of course, had an impact on share and bond prices. When Angela Merkel managed to win support from her parliament for beefing up the European support fund, shares moved up. When reports came out that the banks were deadlocked over the size of the Greek "haircut", they fell back.

But – and this is the big point – they are not in headless chicken mode. Italy managed to sell some bonds to the market yesterday, albeit short-dated ones, but at an OK price. Share prices worldwide have sustained a decent recovery from the wobble in the summer after the fears about a Greek default began to gel. And now they have greeted the prospect of some more weeks of uncertainty with a weary sigh.

There will probably be a modest European recession and that will drag down the world economy as a whole. There are huge uncertainties about the robustness of the banks. But the plain fact is that most large international corporations have reasonably sound finances.

It would be an exaggeration to say that the world economy can operate irrespective of what happens to the eurozone. Europe remains an important trading area. But the lesson of the past few days is that while the world economy needs Europe, it can cope with its difficulties – assuming European leaders gets their act together.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies


Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in