As political tensions in France, the Czech Republic and the Netherlands escalated, the FTSE 100 fell by 2% which is causing renewed fears over the stability of the eurozone and the single currency. Mark Rutte, the prime minister of the Netherlands handed in his resignation which further added to market woes as the sense of instability increased.
Whilst this is bad news for the single currency, it appears to be good news for the USD (United States Dollar) as traders were spooked on the Forex market and made a mass exodus from the euro in favour of what was perceived to be the much safer US currency. Even the German Dax fell by greater than three-and-a-half percent and oddly enough, the French Cac only dropped 2.8.
The fall of the coalition government of the Netherlands combined with weak output in the manufacturing sector of Europe added fuel to the fire. Then there is concern over the upcoming French presidential election which was brutally reflected in the Cac trading at only 81.5p against the GBP.
As the crisis in the eurozone escalates, investors are starting to panic and this is increasing uncertainty in the region. In the end, it appears as though the ECB’s efforts to stabilise the economy in the eurozone has fizzled out, even after huge amounts of money were pumped into the economy in another round of quantitative easing.
Since the final month of 2011, at least €350 billion was pumped into the eurozone but still the ECB has been the target of criticism for not following the example of the BoE and the United States Federal Reserve. It seems as though no one wants to own a part of the blame which at the moment is being levelled at the ECB for lacking in action that was decisive. All eyes are now on the market as it opens zone by zone across the continent.
