Some rielief

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The data on the Sentix Euro Break-up Index, which was collected shortly before Christmas, show a certain relief. The fact that Italy has a recapitalization of the deprecated bank Monte dei Paschi reduces the exit probability for Italy, if only slightly. The fact that the dangers for the Eurozone are by no means banished is shown by a look at the conta-gion risk index.

Investors are again looking more confidently at the Eurozone. Shortly before Christmas, the probability of a break-up of the euro zone declines from just over 24% to 21.8%. The decline is mainly due to a reduction of break-up risks in Ita-ly (16.1%). However, Italy remains the number one euro crisis candidate number 1, even before Greece.

sentix Euro Break-up index: headline index and Italy

The fact that this is by no means a lasting relaxation in the euro question is shown by a look at the index for the measurement of the risk of infection. This index increases when investors think there is more than one exit candidate. Since the sub-index for Greece is rising again this month, contrary to the overall trend, this has a negative impact on the risk of infection.

This index increases accordingly (see chart below).

sentix Euro Break-up Index: Contagion risk index

 

Background

The sentix Euro Breakup Index is published on a monthly basis and was launched in June 2012. Its poll is running for two days around the fourth Friday of each month. Results are regularly published on the following Tuesday morning. Survey participants may choose up to three euro-zone member states of which they think they will quit the currency union within the next twelve months. Further details on the sentix Euro Breakup Index can be found on http://ebr.sentix.de.

This month’s reading of 21.8% means that currently, this percentage of all surveyed investors expect the euro to break up within the next twelve months. The EBI has reached its high at 73% in July 2012 and touched its low at 7.6% in July 2014.

The current poll in which 933 institutional and retail investors participated was conducted from December, 22th to December, 24th 2016.

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