Worker strikes in France and Germany

Yesterday saw numerous worker strikes taking place in the EU’s two most important economies: France and Germany.  In France workers of oil giant, Total, went on strike.  While in Germany employees of the airline Lufthansa went striking.

Analysis: Several weeks ago there was a worldwide fear that spread throughout the bond markets regarding the economic health of Greece.  Additional fear was mounting because of the troubles in Italy, Portugal and Spain.  The fear abated when the EU made a shallow announcement.  The gist of the announcement was: don’t worry we’ll continue monitoring the situation.  Quite literally nothing specific was announced.  To me, this is proof that professional investors (bond traders) continue to ignore salient facts.  However, I am certain that a part of the reason for the tepid response to the EU announcement by market participants was the belief that the EU would response if it had to respond.

Yesterday’s strikes however are a strong indication that the two largest economies in the EU, France and Germany, will be unable to act to help Greece.  The reason is that these strikes create internal political pressure for the nations involved.  Likely this will result in navel-gazing for each country that will severely hamper the ability of the EU to respond to any of its members’ debt crises in a unified manner.  Striking workers at home will want dollars spent on themselves and not on workers in a foreign country, albeit another EU country.

Importance grade: 7; I continue to monitor the brewing European debt crisis.  At this point it feels as if the EU is in “tread water” mode.  However, it would not take much to shock the debt markets of Europe into worldwide European debt flight.  The striking workers have just decreased the ability of the EU to coordinate a response to any debt defaults.  Not good.

Jason