EUROZONE: Steve Barrow of Standard Banks says the….

EUROZONE: Steve Barrow of Standard Banks says the euro and eurozone
bond markets may react differently to a bailout from the IMF rather than
a bailout from the new European Monetary Fund (EMF). The main advantage
of the IMF “stumping up cash for Greece” is that it would leave the
eurozone’s “no bailout” rule intact. “German politicians and the ECB
clearly cherish this rule and would only want to see it compromised if
the situation were desperate.” France on the other hand, seems more
willing to help Greece, “even if the cost is damaged credibility.”
The danger of an IMF bailout (if other peripherals follow) is that the
bailout could “lead to wider spreads than under some sort of EMF scheme
that creates an immediate and well-defined safety net for any eurozone
countries that get into trouble,” Barrow says. Euro weakness recently
has tended to go “hand in hand with wider bond spreads and vice versa,”
he says, adding…, “If that is correct, the key issue is whether the
euro leads bond spreads or whether bond spreads lead the euro,”