Eurozone shows solidarity

It has been a week where the economic focus has been firmly fixed on the Eurozone for the most part.

There seemed very little to be optimistic about following the credit downgrade of the two French banks SocGen and Credit Agricole. Yet there were encouraging signs of solidarity during the week too, when the leaders of Germany and France offered vital reassurance to the beleaguered Greeks.

The head of the European Commission, Jose Manuel Barroso, said he would soon deliver proposals for the issue of Eurobonds, which would provide the cash-strapped peripheral economies with much easier access to funding.

Although Eurobonds are only at the concept stage, and despite the fact that most of Germany remains strongly opposed to the idea, equity markets responded well to the news and the euro strengthened.

Next week may present more cause for optimism. The leaders of the BRICS (Brazil, Russia, India, China, South Africa) economies are meeting at the annual World Bank and IMF summit to discuss providing further financial support for Europe.

This coupled with the well documented “conference call” meeting between Sarkozy, Merkel and Papandreou, the Greek prime minister, have added up to give the Eurozone a much needed boost. However, traders will remain cautious over debt contagion for the foreseeable future.

Jeremy Cook is chief economist at World First foreign exchange