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									WEEKLY COMMENT                                                                                    WEEK 18

The attached chart highlights quite clearly how the Southern European and Ireland Sovereign debt is
interconnected! The late 1990’s will be remembered as the Asian Financial Crisis and all the talk of Greece only,
this crisis is about a European Financial Crisis as a whole. The following points are vital
    1. Germany has spent the past 20 years restructuring and supporting the reintroduction of East Germany into
       the EU. They are now being asked to write out checks for the multiple serial over spenders mentioned
       below and they are not surprisingly reluctant. However, they also have to take their share of the blame for
       lack of spending and creating a number of the regional imbalances within the region.
    2. Greece has total debt of $236bn, of which €120bn is being refinanced now. The other PIGS countries have
       many multiples of the size of the problem
    3. The UK is not even mentioned in this chart and with a hung parliament GBP has tanked considerably more
       than the Euro in recent days. The UK budget deficit is the worst ratio of the lot!
    4. The austerity package that has been agreed for Greece is hectic on the population and the bond holders
       are not taking any haircut on their lending exposure. Surely in any negotiated bankruptcy all participants
       needs to contribute to taking the pain. The treat of contagion is about how big the bailout number is, not
       whether Spain, Portugal et al can avoid the same austerity packages surely?

The big picture issues, bubbles and risks of three years ago are slowly being bought to the fore and dealt with. This
European Debt Crisis is not one that Abu Dhabi can simply write out a check to sweep under the carpet. Remain
short Euro and GBP even at these levels.
Have a good weekend.
Scott Campbell
Managing Director & Fund Manager
7 May 2010

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