Who Will Quit the Euro?

More than 50% of investors believe that it is highly possible at least one country will leave the Eurozone next year, according to a latest Barclays survey.

The Global Macro Survey Q2 edition, released Monday, showed that 58% of investors interviewed expect at least 1 country to leave the single-currency area next year, an increase of 19% from March.

And 50% of respondents believe an exit would be confined to Greece.

While the risk of a quick Greek exit dwindled after the pro-bailout New Democracy Party won Greece's parliamentary elections Sunday, it is still uncertain whether the party would succeed in forming a coalition government and fixing the country's economic woes.

Such uncertainties were evident when shares in major European stock markets pared early gains after Sunday's election. Italian and Spanish shares plunged nearly 3%.

There would be difficulties ahead for the Greek economy, whether they are part of the euro or not part of the euro. But I believe the challenge will be more successfully met if they continue to be part of the Euro, Robert Diamond, Barclays Plc Chief Executive Officer, said before Greece's weekend elections.

The underpinnings of the single currency are very strong, Diamond said, adding that it is in the interest of both Greece and Europe for the southern European country to stay within the Eurozone.

Barclays has no direct exposure to Greece and the market is more prepared than 6 or 12 months ago, said Mr. Diamond.

However, in some area of Europe, both governments and banks were slow to react relative to the US and Britain. So I think it's fair to say that there are more changes to come across for continent Europe and the financial services industry.

As for China, Mr. Diamond is optimistic. The Chinese economy hit bottom in May and June, and would register a growth rate of around 8% + this year despite external headwinds, he said.

Barclays' survey showed that 64% of foreign exchange and equity investors viewed the Euroarea as a Key risk to the Global economic recovery, a ratio nearly doubling that in March.

The survey also indicated that US prospects are relatively strong. Nearly 80% of credit investors considered US credit as the most attractive, 17% up from March.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.