Playing Politics in US and Europe

PRLog (Press Release) - Oct. 12, 2011 - Yesterday evening, opponents of US President Barack Obama’s $447 billion jobs creation plan managed to garner enough votes to block its passage in the Senate. Two Democratic Senators also joined the Republican boycott of the president’s proposal to help turn around the US economy. More than 40 opposing votes were needed to effectively block the plan. The broad plan to support the labor market includes tax cuts on wages and income for employers and provides new funds for constructing roads, bridges, and other infrastructure. DT Trading analysts think that the Senate’s shelving of the president’s initiative will negatively affect investor confidence. In the big picture, it will tighten the knot around political and social processes, as well as undermine the US economy.

Meanwhile, on the other side of the Atlantic, a real political battle has unfolded in Slovakia over the post of prime minister. The European stabilization fund dispute, which is being watched not only in Europe but all over the world, has become almost a minor issue in comparison. The opposition leader in the Slovakian parliament emphasized that lawmakers should find a way to approve the plan to expand the European Financial Stabilization Fund (EFSF), which was rejected yesterday during disputes over the future of the country’s prime minister, Iveta Radicova.

Opposition leader Rober Fico said yesterday that Slovakia “should sign the stabilization fund bill,” adding that his party, which did not support the measures yesterday, is expecting proposals from the ruling coalition. Radicova answered this by saying that Slovakia, the only one of the 17 Euro zone countries using the Euro for exchange and which still has to approve the European Financial Stabilization Mechanism, should find a way pass the EFSF “as soon as possible.” A time for the new vote has not yet been set.

DT Trading’s political analysts believe that Slovakia approving the EFSF expansion is only a matter of time. Slovakia will not be the only Euro zone country to refuse to approve the plan and contribute to the fund when the fate of a unified Europe is at stake. However, the political fuss going on around it is creating a favorable background for corrections on the Euro to continue and on sales of European stocks.

Yesterday, stock markets retreated from their recent highs during the highest four-day growth in world stocks since 2009. Not managing such growth, copper fell for the first time in five days, since investors were expecting Slovakia to pass the bill on expanding the EFSF. European bonds fell again and the Euro weakened against the dollar.

The Stoxx Europe 600 Index slipped down 0.3% to 235.28 at the close of trading. The index rose 8.5% during the last four days, its biggest rally since November of 2008.

DT Trading Limited Analytical Department

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