Cashin Concerned On Europe But Egyptian Streets Worry Him More

Tyler Durden's picture

European riots protests are on UBS' Art Cashin's mind. Furthermore, Art notes that Spain has seen a fifth region (Castilla La Mancha) request a billion-euro-bailout (along with Catalonia's secession concerns) and Greece is hotting up. However, it is Egypt that is becoming an increasing concerning for the avuncular aristocrat of the exchange floor, as he fears the region's growing instability along with its potential need to devalue the pound may see the current 'sporadic outbursts of social unrest' spill over into more broad based protestations on the streets of Cairo.

 

Via UBS' Art Cashin:

Does Don Quixote Know About This – As markets awaited the release of the Spanish budget, word spread that another region, Castilla La Mancha is likely to need a bailout of almost a billion dollars. That would make La Mancha the fifth region needing a bailout.

Meanwhile, rumors say that Catalonia may be checking with Brussels to see how their possible secession would be treated in the Eurozone.

Europe Is Still Focus But Things Happen Elsewhere – This from Stratfor:

In the wake of the Egypt's 2011 revolution, the country is facing an increasingly unstable economic environment. Foreign lending has dried up, forcing Egypt to use its dwindling foreign reserves to stabilize its currency while relying almost entirely on the domestic financial sector to fund the government's budget deficit. Although some foreign aid has been promised, Egypt's attempt to secure lending from the International Monetary Fund is key. In exchange for support, the IMF would likely require complex domestic reforms involving subsidy cuts or currency devaluation.

 

Egypt is already facing serious political challenges, with sporadic outbursts of social unrest threatening the fledgling administration of Egyptian President Mohammed Morsi. Policy changes that increase living costs could trigger further turmoil. However, an IMF loan would help defuse investor concerns and restore Egypt's access to international capital markets. In the meantime, depending on the pace of IMF negotiations, Cairo may need to allow the Egyptian pound to devalue anyway in order to preserve the central bank's foreign reserves.

Watch the streets of Cairo, too