Weekly international investment round up to 6 October 2009
• At the second time of asking Ireland ratifies the Lisbon Treaty
• Will the promises bear fruit?
Whilst politicians may generally believe their decisions sway the investment markets actually, the truth is probably the complete reverse. But over the last week politics has indeed played its part. The collective sigh of relief alone from Europe’s ruling elite over Ireland’s decision to ratify the Lisbon treaty at the second attempt should place some wind in the euro-indices sails for some time to come although using this document alone as the region’s navigation chart may lead it deep into unchartered waters.
Ireland has been hard hit. It was the first eurozone country to fall into recession and back in April all twelve of its banks had the dubuis honour of being downgraded by Moody’s the rating agency and this came at roughly the same time as S&P downgraded the country’s sovereign credit rating from the highest available ‘AAA’ to ‘AA+’.
With reference to this beautiful country, which had previously been seen as one of the EU’s brightest stars with a booming economy once called the ‘Celtic Tiger,’ my June 2008’s article entitled ‘Bitten by the Tiger’ written just after Ireland had rejected the Lisbon treaty in their first referendum had painted a rather gloomy picture. In it I highlighted how the main Irish stock market had fallen 26 per cent in 2007 making it one of the worst performers in Europe and with the building industry accounting for around 14 per cent of the Irish economy I had stated any further slowdown in this sector would have a serious knock on effect to their economy as a whole.
However, during the latest turmoil apart from the letter ‘r’ in truth the main difference between Ireland and Iceland has been the country’s currency and while the Emerald Isle may currently be experiencing very difficult times it would have been a whole lot worse without the euro which has clearly been a large contributing factor in achieving the politically desired positive vote this time around. Glancing through the Irish press the tone it sets of a people so disillusioned by the incompetence of its own government that they were now ready to vote ‘yes’ to any alternative is in itself sad and may ultimately have future repercussions but for Europe as a whole the short term avoidance of harm caused by the rejection of the treaty would appear more important than the merits of accepting it.
With Irish voters accounting for less than 1 per cent of the EU’s near half a billion population the well timed, substantial grant just before the referendum announced by Commission President Barroso on behalf of the ‘European Globalisation Adjustment Fund’ to help 2,400 redundant Irish computer workers no doubt also helped sway public opinion.
Beneath the radar the Greeks snap election saw George Papandreou overturn their unpopular government’s slim one-seat majority by promising a €3 billion stimulus package and a crackdown on corruption which is amongst the worst in the EU.
Following such economic carnage soothing political promises are prising open Europe’s gleaming Trojan gates, whether their gifts actually bring prosperity or something completely unexpected is yet to be seen.
Mark Lamb is Head of the Life Dept. at Citadel Insurance plc which is authorised to carry on general and long term business of insurance under the Insurance Business Act, 1998 and is regulated by the MFSA. Contact by email: firstname.lastname@example.org Tel; 25579000. Website: www.citadelplc.com
This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek financial advice before making any investment decision.