Bill Blain from Newedge on Market Uncertainty Pending European Bailout Votes

10:43 Thursday 29th September 2011
BBC News 24

MARYAM MOSHIRI: The markets are watching what’s going on in Germany very closely, as are we. They haven’t really reacted that much. If we have a look at what’s going on right now, the FTSE down 0.7%, 35 points. It’s hardly really changed at all from its opening mark. But I have to say it has lost a little bit more ground than what we saw earlier on in the morning. Investors are, of course, nervous about the outcome of the vote, but more importantly, they’re nervous about what this means for the future. Yes, if the vote does go through, but doesn’t get the kind of support that Angela Merkel needs, what will happen to Germany’s power to be able to stabilise the Euro in future months and indeed years? Well let’s talk to Bill Blain who is from Newedge broker, and joins us now from the City. Bill, thanks very much for joining us.
BILL BLAIN: Good morning.
MARYAM MOSHIRI: How important is this vote in the general scheme of things, in terms of what the City considers is important, and how nervous investors are about how policy makers are able to stabilise the Euro or not?
BILL BLAIN: Yes, the vote itself is very important. But it’s just one in the many votes going through in Europe just now. Yesterday we had Finland, who’s one of the other sceptical countries. They approved the package. Today we very much expect Germany will. The issue there will be how many of Merkel’s own party vote against her, if she has to rely on the opposition to get this through. Tomorrow we have Austria, and then sometime coming up we’ve still got Slovakia to approve this. Any one of them can say no, and then it’s behind the scenes deals will have to be done. It’s not so much just this German vote that worries markets. It’s the way the whole thing’s still uncertain, still so many bits we don’t know, still the uncertainty.
MARYAM MOSHIRI: That’s the point isn’t it? Because even if this vote goes through, the volatility is going to remain, isn’t it?
BILL BLAIN: The volatility, I’m afraid, is going to be with us for some time. Now we’re very much taking the view that we’ve got all the bits are beginning to fall into place. We’ve got the ECB. It’s pretty apparent that it will provide lots of financing for banks. That will take care of that issue. We’ve got all this talk about bailing banks out to help them raise capital, if there’s a crisis. Now these are the things that will reduce the scale of contagion that is going to follow the inevitable Greek default. But what we’re seeing is a lot of noise at the same time. So yesterday’s comments in the EU about Eurobonds and this Tobin Tax. That’s just noise at the moment. Let’s concentrate on solving the problem. If we can do that, markets will be constructive.
MARYAM MOSHIRI: And of course whatever happens today, the question for the future is how far is a country like Germany willing to go to save the Euro? We’ve had for example the latest unemployment figures from Germany showing an unexpected fall in the number of unemployed. Such a strong economy comparatively speaking to other economies in the Eurozone. How far do you think the German politicians and public will be willing to go to save the Euro in the future?
BILL BLAIN: Yes well the bottom line is that saving Greece is a speed-bump in the road. It’s nothing more. We should have done it ages ago. The benefits to Germany of having a strong Europe are legion. They can pay up for that kind of thing anytime. And if we’d done it eighteen months ago, we wouldn’t be facing this problem today. The problem is now that the crisis isn’t just about Greece, which is the small problem. It’s the big problem, and it’s exactly what you say. The fact that Germany is so productive, so competitive, and doing so well, while the rest of Europe is trying to play catch-up, to run with German interest rates, to run with German inflation levels, that’s what causes the underlying problem. If we sort out Greece, and we stop contagion, we still have to have a long term plan, so that countries like Spain and Italy particularly can post decent growth rates, to grow themselves out of this recession, depression, they’re in. If they can grow, then they can pay off their debts long term. And that’s a much more different question to just sorting out Greece tomorrow. This is a long term thing. But again, I think people are beginning to address it.
MARYAM MOSHIRI: Absolutely. It’s about where the growth is coming from isn’t it Bill? Thank you very much.
BILL BLAIN: In the long run. Thank you very much.