Fish or cut Bait

Last week I was sent an economics article in which the writer cautioned that the markets had a decidedly August '08 feel about them and yet it was unclear as to what investments would be appropriate.

Being an investor myself I had agonised as to whether the old adage "sell in May and go away" was the correct course of action- it was. Since that time we have been buffeted by the volcanic eruption of Greece and the makings of a classic case study on the inter-connectivity of politics and finance.

The media is filled with the warnings of economic technocrats who if surgeons would lop limbs off the body of Europe without a moments reflection as to the political and social aspects of the case. And that might be the biggest impediment to a lasting solution. Europe, and by extension the world in this new global marketplace appears to be caught between what are posed as mutually exclusive decisions between market and fiscal disciplines, the latter of which is actually political.

On the continent the great powers France and Germany are slugging it out with one eye on the edifice of Europe and the other on their electorate. Posturing by Mr Sarkozy belies a deep-seated insecurity with regards to the next election, and a realisation of the limits to the actual room to maneuver by France which is more closely related to Club Med than to the Teutonic North.

Elsewhere, the undercurrent of populism of the "are we saving the Greeks-or the banks" variety permeates the discussion in Germany but carries menace in every country that has played at the ECB's financing window. The proponents of this attack seem unable to comprehend the fact that it doesn't have to be an either/or question and that quite possibly it is both necessary and desirous to do both.

If the Euro is worth saving, and if the success of the Euro is intimately intertwined with the success of Europe, then the Greeks will need to be saved from themselves. Saving Greece will also save the banks, which will also help save Europe in the short term. What is absolutely clear is that new rules and regulations will have to be introduced to protect the integrity of the Euro/Europe construction if it is to be saved in the long term.

Once again Europe stands at the cross-roads trying to figure out which continental power will take the lead. This time there are two advantages in comparison to the past. Firstly, it doesn't appear that it will move from the political to the military, and secondly the UK doesn't seem to be in a position to play the spoiler.