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Forex Flash: EU crisis is no ordinary predicament – Goldman Sachs

FXstreet.com (Barcelona) - According to the Economics Research Team at Goldman Sachs, “The current EU crisis is not a ‘normal’ slowdown or recession and, therefore, should not be used as a template to assess whether a fiscal union is required to guarantee the long-term stability of EMU. National stabilization policy only second best, but sufficient in
‘normal’ times.” Whether countries are able to deal with a cyclical shock or not depends on their fiscal position, the size of the shock and the fiscal multiplier.

If we assume a balanced budget position and a shock in the form of a 2% recession, EMU countries would have sufficient capacity to use fiscal policy – either via automatic stabilizers or outright discretionary measures – to smooth the cycle. However, “a long transition period will be needed until governments once again reach a fiscal position that provides them with sufficient flexibility to make full use of a national stabilization policy. In dealing with the legacy of the past crisis, it is also possible that significant one-off transfers – in the form of debt-restructuring(s) – will be required for some countries to reach this point.” the team adds.

Commodities Brief – Silver cannot breach 29.00 level, USDIX poised for weekly drop as precious metals pare losses

Spot gold prices found themselves in recovery mode Friday as US inflationary measures yielded results that were in line with consensus expectations. Given that the figures fell within an acceptable range, as dictated by the Fed, it appeared as though no further action would be taken, as this is simply a natural byproduct of the monetary easing measures. The yellow metal moved up to the 1597 mark on the data release in the US, however the 1600 resistance/barrier proved too much to summit today. During American trading today, the price of gold has settled at USD $1594.36 per oz.– having received another boost from a waning USD index, which found itself in the midst of its first weekly decline in over six weeks.
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Fundamental Afternoon Wrap: EU Framework under question while EU leaders look for growth

While the EU Summit takes place and leaders try to find solutions for the rising unemployment hitting the economy and countries under bailout deals as well as an agreement to bailout Cyprus, the EU institutional framework comes into question once again.
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