President Barroso's expresses roadmap to European Parliament for Euro

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President Barroso's speech yesterday to the European Parliament showed the way to further gains for the euro as he set out a "roadmap [that] charts Europe's way out of the economic crisis". There were three elements to his proposal: the recapitalisation of banks; introduction of a permanent financial stability mechanism; and better observation of fiscal deficit rules. He also called for another round of stress tests on banks'; acknowledging that sovereign debt is not risk free.

This pressed all the right buttons for investors; they want to see a serious commitment from EU leaders to find a solution.

The mood, already lifted by hopes that the European leaders will unveil new measures to solve the crisis, was further lifted when Slovakia’s Parliament voted ‘yes’ to the EFSF extension and the release of the Eurozone Industrial Production. This increased unexpectedly by 1.2 percent during August, the fastest pace of increase in nine months. This increase might ease concerns over a new recession in the 17 member nation zone.

Meanwhile Sterling floundered on yesterday’s unemployment figures as the UK saw the jobless total rise from 114,000 to 2.57m, its highest level in 17 years. David Cameron acknowledged that unemployment figures were “very disappointing”; it certainly paints a bleak picture of the UK.

This week…

G20 finance ministers will press Europe this week to find an urgent solution to its debt crisis.

There is unlikely to be a break through at the two day conference starting in Paris on Friday due to disagreement within the Eurozone over how to recapitalise banks. They are expected to make some progress on the support for an increase in the IMF's power to cope with the growing threat of crises in large developed economies.

Meanwhile a clash between Washington and Beijing over the value of the yuan could thwart efforts to address broader global growth. Despite more and more governments at odds with each other, there is evidence of some central banks taking decisive action. Last week the Bank of England authorised QE2 while Brazil and Indonesia have cut interest rates.

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Another good day for the Euro

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