While the recent impasse in US politics has passed, many of us realise that this stalemate situation will again cause undue volatility in the months ahead. For reserves managers this once again means huge fluctuations in global financial markets and unfortunately large swings in the valuation of our reserve assets.
In addition, if market participants tend to see the monetary union as a system of mutual financial assistance in the event of serious trouble, doubts about a country’s solvency could spread more quickly to the other member states. This is why common fiscal rules are an integral part of the Treaty establishing the monetary union.