28 January 2013
Posted in sentix Euro Break-up Index News
The sentix Euro Breakup Index (EBI) for January falls from 25.0% to 17.2%. This is the EBI's sixth consecutive decrease and, once more, its lowest level since its inception in June 2012. Only one out of six investors now thinks that within the next twelve months at least one country will leave the euro area. The EBI had reached a high in July 2012 with 73%. The survey was conducted from January 24th to January 27th, 2013. 956 investors took part in the poll.
Greece is still number one candidate that investors name when they are asked about which country they think will leave the common currency within a year's time. But the percentage of those who believe in a so-called "Grexit" is falling ever quicker. While it was 22.5% in December, it is now only 13.9% of all surveyed investors being sceptical about Greece's euro fate. In November, the Greek EBI had stood at more than 30%. At the same time Greece has managed to reduce the distance to the country with the second highest EBI: For Cyprus the index only decreases by a little more than two points to now 7.5%.
For the remaining periphery countries perspectives are even better. Their EBIs have come down to levels which are almost not worth mentioning anymore. Only for Portugal and Spain the readings stay above the one-percent-threshold with 1.5% and 1.4%, respectively. The EBI for Italy now stands at only 0.6% and EBI for Ireland at 0.3%.
Interestingly, Germany's EBI with a reading of 1.8% is now for the first time higher than those for Portugal and Spain. Here, it is – the often lagging – private investors among the survey participants who drive up the reading of the index. Consequently, they think that Germany leaving the euro is more probable than a euro end for the currently ailing periphery countries. But it has to be pointed out that the absolute reading of the German EBI is so low that the threat of a German euro exit does not look very real.
Given the low EBI readings in January, the current spreads for the government bonds of periphery countries still seem to be too high. This may be caused by the fact that many institutional investors currently face barriers to invest in those markets. In this context, one should also have a look at the so-called safe havens like the Swiss Franc, German Bunds or US treasuries. They should become ever less attractive with fading fears of a euro breakup. And for the renewed confidence in the common currency to stay (to say the least), we see two reasons: On the one hand, it is the clear commitment of the European Central Bank and European politics for the euro. On the other hand, it is the global economy that sends signals of strength again. Not only the US and the Chinese economies have gained momentum lately, also euro zone gdp seems to be close to growth again. The turn for the better in the euro area was highlighted by the sentix economic indices ("sentix investor confidence") over the last months already and is now mirrored by other indicators like the German ifo index or the EU's Economic Sentiment.