SOCGEN: Another 'Eurozone Shockwave' Is Coming This Spring

thenews 2013.03.14 21:39

Société Générale strategists are warning clients of another "Eurozone shockwave" coming this spring.

In fact, they say it's going to be one of the three major themes driving global currency markets for the rest of 2013.

The Italian election yielded inconclusive results, and it's looking more and more likely that another election will have to be held. Of course, that one may not be conclusive either.

Meanwhile, Germany holds its own elections in September. If Italian bond yields rise to unsustainable levels, German politicians aren't likely to be too supportive of their neighbors to the south while trying to secure re-election at home.

In his latest report, SocGen strategist Vincent Chaigneau writes:

The post-Italian election has been fairly quiet. But we are concerned ... It is not just the political uncertainty, but the fact that reforms will surely be on the backburner for another six months at least. And with such political instability, it would be very hard to access the ECB’s OMT.