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Traders on Wall Street's New York yesterday.Stock Exchange AP Photo/Richard Drew

Column Confused about what will happen to the euro? Everyone is.

Former trader Nick Leeson speaks to those working at the heart of financial markets and finds that uncertainty and confusion is thwarting a move forward.

CONFUSED? I DON’T think anyone could be criticised for being confused over the latest developments to halt the eurozone crisis. As fights broke out in the Italian parliament and the German Chancellor likened the problems to war, confusion is rife. I spent much of Thursday in the City of London, meeting up with friends who continue to work at the real heartbeat of the financial markets. They are clearly confused, so you have every right to be.

Banks need to be recapitalised so that they can assume more losses. In the normal course of business that should be counter intuitive but unfortunately that is the only way forward. Where will the extra funding come from? The most likely source will be you the tax payer but there are attempts to avoid this and source the needed funds elsewhere. The head of the Europe’s bailout has already gone cap in hand to China. China has a €2.45 trillion cash reserve and is seen as one of the very few countries as capable of shoring up the struggling euro.

Many will question the cost of such a solution. China has a history of human rights abuses that many find unpalatable. Joining a bailout though could help China establish itself as one of the elite governments that help manage the world economy. There is no guarantee that they will jump to our aid though: the Chinese have already been badly burned by losses in 2008 from investments made in the United States and may demand firm guarantees on not suffering a repeat.

Collectively, the markets appear to have viewed the recent developments and ECB led political spin as positive, although yesterday they were starting to reverse many of those initial gains.

The main topic of discussion on Thursday was the complete confusion surrounding the financial markets. There is so much uncertainty, nobody believes that a solution has been found, the precious metals markets are on a roller coaster ride, aggressively bouncing one day and falling through the floor the next yet Wall Street enjoyed one of its best ever monthly movements and the euro continues to trade towards the higher of its historical range. All the indicators are contradicting one another and adding to the confusion.

For the first time, markets experts are admitted that they don’t know where the markets are heading

These people all have strong opinions and are paid well for their expertise and their opinionated views on the direction of the markets. For many of them, for the first time ever, asked which direction that the market will take they are choosing to answer ‘I really don’t know’. These are experts with a significant accumulated wealth of experience. It is not the time to invest!

Shortly, focus will switch to the Group of 20 leaders’ summit in Cannes, France. The summit will focus on Europe’s efforts to contain its sovereign debt crisis and avoid a repeat of the financial shock that roiled markets after the Lehman Brothers collapse in 2008. Many in the markets believe that the decision to allow Lehman’s to fail was a colossal mistake and the ultimate cost is still racking up. Lehman Brothers had few or no retail customers and it was initially believed that the impact could be contained but the opposite has been proven true, Lehman’s were an intrinsic player in many different financial markets and counterpartys to many different instruments.

The G20 need to act quickly as rumours already abound about a number of different institutions, MF Global, one of the most successful broker dealers in recent history faces bankruptcy. Regulations require certain capital adequacy requirements are maintained, much as they are with a bank. With too much exposure to European debt, customers are leaving in droves. They have no other option to safeguard their monies. MF Global are selling their assets and are rumoured to be seeking chapter 11 bankruptcy protection. In banking terms, this would be considered as a run on the bank with deposits being removed aggressively.

Further afield, other members of the G20 are facing their own problems. Tokyo’s latest foray into currency markets followed weeks of warnings that its patience with the yen’s strength was wearing thin. Tokyo is keen to win G20 understanding that a strong yen is one challenge too many for an economy grappling with a nuclear crisis, a $250 billion rebuilding effort from a March earthquake and tsunami and ballooning public debt.

Japan would argue that the yen is sought by investors worried by the euro zone debt crisis and stuttering U.S. growth and the demand has nothing to do with the fragile health of the Japanese economy.

Problems and confusion are walking hand in hand right now. The ultimate solution still evades us and most recent developments suggest that the solution may now lie outside of the Euro zone in places that may not have previously been considered. This suggests that the degree of desperation is increasing. Problems in Ireland have been replaced by those in Greece, Portugal, Italy and potentially Spain but unfortunately the ultimate fate of all is intrinsically entwined. All focus now switches to the G20 meetings and the hope that a clearer path is found.

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    Mute Fergal Reid
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    Nov 30th 2013, 10:42 AM

    The people of Ukraine, particularly western Ukraine, feel like they’ve had their future stolen from them by Yanukovich and Putin. They’re right. These protests are about the existential future of the country and whether it turns west to Europe or east once more to Russia.

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    Mute sean t bugger
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    Nov 30th 2013, 10:58 AM

    Spot on ferg. Been there many times. They need visa to go anywhere outside Ukraine. Average job is 300 a month. They want the same freedoms and chances we have.

    Why don’t we protest like this? ?? Silly boy nieve boy. We collectively through national greed got ourselves in this mess. Sure bankers were horrifically horrible b@stards but it was property sellers wanting more and more. People living on credit. Ourselves to blame and we know it and we know we have to pay the piper and live with the hangover.

    So that’s why. No more of this uneducated why dont we protest drivel. We don’t cos we know we are to blame.

    Oh and alot of good its done for the Greeks.

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    Mute Fergal Reid
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    Nov 30th 2013, 11:09 AM

    Yup. You’re on the money yourself. Ukraine is a Second World disaster zone (literally in parts, thanks to Chernobyl). Ireland is not. Different circumstances, different protests. Walking down the street with a placard is not a righteous act in and of itself.

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    Mute al shamen
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    Nov 30th 2013, 11:38 AM

    You do know that ethnic Russians who naturally feel a close affinity with the country of Russia make up a large percentage of ‘The people of Ukraine’ don’t you?

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    Mute Coddler O Toole
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    Nov 30th 2013, 11:59 AM

    Sean, all 6 of the Irish banks collapsed in 2008 because they speculated massively and greedily on commercial property. This collapse and subsequent suicidal bailout triggered a deep rececesion which now sees hundreds of thousands unemployed and unable to pay the inflated mortgages they took on to house themselves for the most part. These people played no part in the economic collapse so please don’t presume to admit guilt on their behalf.

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    Mute Fergal Reid
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    Nov 30th 2013, 12:06 PM

    Ukraine is bifurcated between an ethnically Ukrainian west and an ethnically Russian east. It’s like Belgium only a DISASTER.

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    Mute Linda ralph
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    Nov 30th 2013, 12:19 PM

    Idiot

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    Mute Linda ralph
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    Nov 30th 2013, 12:21 PM

    That was for sean

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    Mute sean t bugger
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    Nov 30th 2013, 4:01 PM

    Whatever. But yes our disaster was collectively our fault. Selling your house in 07 damn it I want 500k although I paid 50k in 80s no wont accept 490 damn it lets push it to 550.

    Developers made huge money off our greed and the banks lending more encouraged our grees for their profits. Its all greed.

    Mind you in Ukraine in kyiv and the west its anti Russian they after all caused a famine. But one corrupt country. Justice for those who can afford it huge class differences. So refrain from input unless you have idea what your talkung about as clearly you don’t.

    Ta ta

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    Mute Philip Kenna
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    Nov 30th 2013, 10:59 AM

    Looks like mother Russia pushed some buttons.

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    Mute Aireach
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    Nov 30th 2013, 11:53 AM

    The over zealous expansion of the “EU” has to stop somewhere. Ukraine has never been historically,politically or culturally associated with western europe.

    Where do you draw the line?

    The EU doesnt need another basket case country on its books. It’s full of them already.

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    Mute Aunty Simmonite
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    Nov 30th 2013, 10:58 AM

    Yanukovych’s decision to scrap the EU deal was because he thought that the price of entry to the EU was too high. He must have been thinking of Greece.Maybe Spain or Italy or even ,dare I say it, Ireland.

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    Mute Fergal Reid
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    Nov 30th 2013, 11:11 AM

    I beg your pardon? He wanted hundreds of millions euro more in loans than had been offered. It was a combination of blackmail and bowing to Russian pressure. I hope they get lot of cheap gas because they ain’t gonna get nothing else out of this shabby deal with Moscow. Maybe Putin will let them keep the Crimea.

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    Mute al shamen
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    Nov 30th 2013, 11:40 AM

    Cheap gas is rather important in a country which suffers long and extremely harsh winters.

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    Mute Anna Taranova
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    Dec 1st 2013, 1:27 AM

    Absolutely not. He is thinking just about his own wealth and his safety, guaranteed by Russia. He is facing impeachment now, and use force to avoid this.

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    Mute Stephen Barry
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    Nov 30th 2013, 10:37 AM

    Protests, rally’s could the journal translate these words for Irish people please.

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    Mute Kris O Kay Kay
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    Nov 30th 2013, 11:40 AM

    Does the Ukraine want to join the EU or have closer cooperation? What is the reason for the protests?

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    Mute Aunty Simmonite
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    Nov 30th 2013, 12:23 PM

    You may not have heard of Mr.Barroso before but he is an unelected Portuguese Maoist who pulls more strings than our beloved Enda who actually was elected. Then we have the other muppet Van Rompuy and if he and Barroso are upset then Yanukovych must be right.

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    Mute Aunty Simmonite
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    Nov 30th 2013, 12:10 PM

    “The times for limited sovereignty are over in Europe,” Mr Barroso said

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    Mute Kenneth
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    Nov 30th 2013, 12:24 PM

    That’s how to deal with low life’s

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    Mute Vladimir Kalugin
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    Nov 30th 2013, 7:27 PM

    What the Journal doesn’t say is that the people who want Ukrainian assosiation with the Europe rather than Russia, are the absolute minority. Historicaly there is a group of people in the west, who hate Russia, whose fathers were close to poles; who later were fighting at Hitlers side during the war, and who pass this hatred to their children..Fk them..The majority of population see better future close to Russia..If you go to eastern part of Ukraine, you won’t even here Ukrainian languege, everyone speaks Russian..And lets be honest, Europe absolutely doen’t need Ukraine with it’s problems..

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    Mute Vladimir Kalugin
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    Nov 30th 2013, 7:36 PM

    And by the way, Ukraine played major part and had a good place in Russian Empire and in Soviet Union, when, if it would join Europe, it would just become colonial appendix, like baltic countries and others..

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    Mute Anna Taranova
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    Dec 1st 2013, 1:30 AM

    Vladimir, you are wrong. Majority of people in Ukraine wants to move to EU side, not Russia. You will see soon yourself this “minority”.

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    Mute Vladimir Kalugin
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    Dec 1st 2013, 11:37 AM

    I am seeing them and hearing them the last years..Fools, that don’t even understand that are being used..Tell me, what good did the “Orange” revolution brought to Ukraine, when they came to rule?
    Ukrainian government turned into circus, war criminals became heroes, and Russians from being friends, became enemies..did Ukraine prosper from it?..
    Now the same people want Eurointegration, even though countless number of economists said that Uraine’s economy will only loose from it..up to complete defolt..As i said, look at baltic countries..how it ended up for them..
    But If you are so eager to become western puppets, separate Lviv, make Klicko the president, and welcome to the sinking ship;)

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