Uncertainty returns

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Investors increasingly worried about the shape of the Eurozone: The sentix Euro-Break-up Index (EBI) continues to raise 2.9 points reaching 16.9 in January. Climbing the third straight month. Besides the issues facing the periphery economies, lack of reforms and political stalemate increasingly worry investors.

In the past years, investors were mainly concerned about economic issues. However, recently societal and political issues dominate investors’ agenda. Besides unsolved issues in the banking system, increasing imbalances among members, the lack of labour market reforms and the rise of Eurosceptic political forces, migration woes commence to line up in an ever longer list of unresolved issues. Thus, the sentix Euro-Break-up Index (EBI) continues to raise 2.9 points reaching 16.9 in January. Recent attempts to explicitly solve pressing issues by giving up fiscal discipline only shifts the burden to future generations. However, it does not solve today’s issues. The sentix indicator measuring risks of EBI contagion stalls in January. The January index is slightly falls to 30%. Nevertheless, rising Eurozone government bond spreads point to further mayhem to come.

sentix Euro Break-up index - Overall index and contagion risk

 

Background

The sentix Euro Break-up 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 Break-up Index can be found on: http://ebr.sentix.de.

This month’s reading of 16.9% 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 1097 individual and institutional investors participated was conducted from January 24 to January 26, 2016.

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