The classic case of having your own cake and getting to eat it too is what England faces right now. For many years, even though New York and Europe collectively have had a certain financial prowess, London still is the epicentre of all financial activities taking place in the West if not the World.
Overall, this has paid dividends to the country but now it faces a new challenge. During the last month, England has done all in its power to distance itself from the eurozone crisis and in latest development, it has asked to be excluded from the solution altogether. Germany and France allowed the UK to exit but now London is waking to a new reality where it is no longer at the centre of world finance. After trying to take itself out of the equation, there is a possibility that now instead of LIBOR, EURIBOR might be a reflection of the new financial order which also carries the risk of making Frankfurt or Brussels might be carrying out most of world’s financial transactions. This fear comes at the eve of G-20 summit which is going to discuss the crisis at hand and see how the domino effect can impact their own economy.
The summit can look into a new solution where the risk of the whole contagion can be spread over more countries and economies reducing the burden on Europe itself. As many of the G-20 countries are linked to the crisis in one way or the other, they can join in. This proposal has one flaw to itself which is that as they do not have much skin in the game as they are mainly saving euro rather than gaining much in return. It seems that even though much would be discussed in these meetings, the result would still end up being the same as before. This is much more a ploy to quell the worries in the financial market of their respective countries.
These meetings and summits are becoming more of a signal to the markets rather than anything else at this stage and that is expected to continue until strict action is considered and taken by the countries that are directly linked through the European Union. Until they do something, these summits will prove to be PR moves. The summit will provide a plateau to the financial markets of all the G-20 countries in the coming week and they will look to ease some of the uncertainty of the markets for the time being. However, all these meetings and moves lose meaning in the face of three key events that are taking place in the backdrop of this all. The first is the upward sloping jobs curve in the US and signs of recovery in the UK as well which is weighing down on the gold prices. The second is the oil situation considering Iran’s economic crisis and hurricane Sandy which has affected oil markets. And lastly the impending fiscal cliff in the US which can send shockwaves through the world markets and make the eurozone crisis look like a regular debt restructuring in the world economy.