Eurointelligence’s
morning briefing asks some questions
Some EU deal pessimism… – alphaville
/ FT
Comments from
several banks after the first day
One more Summit: The crisis rolls on – voxeu.org
Charles
Wyplosz: The EU Summit produced a vaguely
word agreement that can and has been read in different ways in different
nations. This column provides a quick reaction to what was and was not decided.
It concludes that useful progress was made, but this was far from the decisive
turn-around that many had hoped for. The crisis will continue to unfold in the
months ahead.
Angela Merkel took a tough stance ahead of the
EU summit, insisting she would not make concessions. But Italy and Spain broke the will of the
iron chancellor by out-negotiating her in the early hours of Friday morning. Germany caved in to demands for less stringent bailouts and direct aid to
banks.
Did Mrs Merkel really concede that much? – Kiron
Sarkar / The Big Picture
I have been cynical/sceptical for some time
now, but I really do believe that we have an initial basis to progress to some
form of resolution. Its not going to be a straight line, but the move towards
EZ fiscal, banking and political union remains unbroken.
Despite progress, European leaders refuse to
acknowledge that a portion of the debt of the peripheral nations is
unrecoverable. None of steps announced improves the sustainability of the debt
levels of the affected countries, their access to markets or cost of borrowing
in the medium to long term. Ultimately, it is not possible to solve the problem
of excessive indebtedness with more debt or by simply changing the lender.
Curb Your Enthusiasm: The EU Summit Fell Short – The
Atlantic
In any event, the critical issue is not the
ESM's rules of procedure, which can be tweaked on the fly given sufficient
consensus, but once more the financial capacity of the ESM, which is harder to
fudge. When Merkel gives way on that, it might be time to celebrate.
More questions than answers after the summit – Gavyn
Davies / FT
The summit has given the ESM some new tasks, but no new money with which to discharge these tasks. And many details are obscure.
The summit has given the ESM some new tasks, but no new money with which to discharge these tasks. And many details are obscure.
EU Summit: Some Good Progress, But Any Game
Changers? – economistmeg
All of the measures agreed will likely help on
the margins, which has not always been the case at previous EU summits, and
some of the measures could be important first steps towards a fiscal and
banking union. However, next steps towards a banking and fiscal union will be
extremely difficult—and in some cases impossible—to agree, so expect the EZ
rollercoaster to continue this summer.
Despite the summit agreement, it will be a
while before the ESM is authorized to buy Italian bonds.
Was Merkel's Surprising "Defeat"
Merely A Gambit For A German Referendum? – ZH
In other words, was Merkel's surprising
"defeat" on Thursday just a brilliant gambit to get her off the hook,
and let the people decide where the chips may fall? It wouldn't be the first
time Germany has fooled Europe about its true motives.
Leaders take one step
away from the edge –
Danske
Bank (pdf)
Market expectations were very low going into
the meeting and this time the political
leaders managed to deliver more than expected in the market. Despite a
substantial difference in opinion between Germany on one side and Italy, Spain and France on the other, Italy’s Mario Monti managed
to persuade Germany to support short-term measures.
Buy on the News – Economix /
NYT
There is a pattern here. Barclays counts 18 European summit meetings since the beginning of 2010, before this one; decisions seeming to indicate action were announced after 10. Barclays notes that global markets tend to react positively, but the reaction typically fades.
There is a pattern here. Barclays counts 18 European summit meetings since the beginning of 2010, before this one; decisions seeming to indicate action were announced after 10. Barclays notes that global markets tend to react positively, but the reaction typically fades.
EU summit deal leaves many questions open – Analysis / euobserver
The EU summit has failed to produce a big step
towards a political and economic union, say analysts, with measures adopted to
help out Spain and Italy seen as "palliative" and vague plans to
establish a central banking supervision
Ambitious in the end – but policymakers should
forsake summer holidays – bruegel
On the whole this is an ambitious outcome. Two
challenges will now have to be faced. One is technical: to agree on the various
dimensions of banking union and to come up with a credible proposal within a
very short time frame. The other one is political: even informed public opinion
in the member countries is totally unprepared to what this new policy regime
may mean.
Yet another “break- or-make” summit – bruegel
I am not sure, how the Bundestag will react on
the matter in the ratification process of the ESM. See FAZ on the matter. It is
unclear what PCS as enshrined in the ESM treaty means when the ESM gets to do equity
injections into banks.
Laughable Text of EU "Memorandum of
Understanding"; ESM Not Been Ratified Yet Already Requires Changes; How
Much ESM Firepower Is There? – Mish’s
For now, the market is pleased with this
non-breakthrough. Let's see how long it lasts. I suspect not long.
1) The benefits of the announcements (lower
yields on sovereign bonds and higher share prices in EU banks) will be
short-lived. 2) None of these decisions address the core issues facing the EU
banking system: namely, insolvency and excessive leverage. 3) No one in the EU
actually has the money to make these measures work (again, Spain and Italy will provide 30% of
the ESM’s funding).
Are we heading for a 'half-Europe'? – Opinion / euobserver
Crisis rescue programs and the next seven-year
EU budget have political implications that go beyond economics.
The Good Bad and Ugly from the European Council – Re-Define
Very nice!
What Must Be Done Now to Save the Euro? – Economix
/ NYT
Perhaps agreement on this long-term plan will
provide political cover for Germany to support the short-term measures required
now: broader uses for Europe’s rescue funds, the issuing of euro bonds, more
aggressive measures by the European Central Bank and a significant growth pact.
A good day – Free exchange
/ The Economist
A real plan to allow the emergency funds to
recapitalise banks directly, thereby weakening the nasty link between bank
confidence and sovereign solvency, would indeed be a significant step forward.
We'll see if it's seen through to the end without major steps backward.
Cornered by other Eurozone leaders, Merkel
concedes – Sober
Look
Overall the market reaction may be premature.
There is nothing final about these agreements and they do not get at the heart
of the problems of run on banks and investors' ability to absorb more sovereign
debt
German concessions trigger epic Euro squeeze – Saxo
Bank
A bit too early to tell, let’s see what the
German spin is on the summit outcome today and how the market behaves next
week, which very well may include an ECB rate cut. My inclination is to believe
that this move could last between a day to two weeks rather than on the scale
of the summer holiday.
Did the EU summit… actually succeed? – Wonkblog
/ WP
One major problem? The European bailout funds
don’t have unlimited resources. If they throw $125 billion at Spain’s banks and another
couple hundred billion toward Italy, pretty soon they’ll
be running low. The only entity with unlimited euros is the European Central
Bank. And right now, there’s no talk of using the ECB to provide bailouts.
Which means that this latest move might have just forestalled the crisis,
rather than ending it permanently.
The EU Council—An Initial Appraisal – PIIE
The key political issue is that with the
surrender of national sovereignty implied in both the agreement on banking
integration and the adherence by Spain and Italy to a “shadow IMF program, both
the ECB and ESM (e.g., the German and other Northern governments) will accept
these types of support interventions. One should expect relatively few details
to be provided about these interventions (at least in real time) because of the
obvious political sensitivity—the desire to fly under the radar screen,
avoiding parliamentary hassles and public inquiries.
What They Really Said: Key Soundbites From Last
Night's Eurosummit
– ZH
We’ve Seen This Horror Movie Before – MarketBeat
/ WSJ
Enjoy the rally, book some profits, go have a
nice little BBQ this weekend, but don’t think you won’t find yourself back here
in a four months, or three, or two, or the week after next worrying about same
exact things again.
As Europe Moves To An "E-TARP", Goldman Is Selling Spanish, Italian And
Irish Bonds To Its Clients – ZH
“We recommend being long an equally-weighted
basket of benchmark 5-year Spanish, Irish and Italian government bonds,
currently yielding 5.9% on average, for a target of 4.5% and tight stop loss on
a close at 6.5%.”
The Big Blink? – Testosterone
Pit
So, here are the summit results on these items:
Eurobonds: nein. A banking union with tools to prop up banks and with a common
deposit insurance fund: nein. Allowing the ECB to buy sovereign bonds directly:
aber nein! They did agree on a common banking regulator (even Merkel had wanted
that). Of course, they already have one
UBS: Going into this summit we had a
monetary union in Europe that clearly did not work. Coming out of this summit we have a monetary
union that still does not work… As ever with a Euro summit there
are unanswered questions. Grandiose statements are what heads of government
specialise in – the details are left to later
In the final analysis Europe is quite exposed at this moment and
may be for quite some time. The ESM, after the change in seniority status, must
be re-affirmed in at least two countries that are the Netherlands and Finland and Germany has not yet approved it yet either. The EFSF has already spent $450 of
its capacity on Greece, Ireland, Portugal and now $125 billion for Spain. The balance left in
the fund is tissue paper thin and that is all that is in existence presently
for any more problems in Europe.
Update 2-July
Europe and Yogi Berra – David
Kotok / The Big Picture
European leaders have finally determined
something that was apparent to everyone for years. Now comes the difficult part: how to
implement a euro zone-wide banking system…Merkel agreed to give up something
she did not have in order to achieve the continuation of austerity requirements
in the southern countries. She agreed
not to press for the two tiered seniority pledge.
EU summit aftermath – MacroScope
/ Reuters
None of the above means that the summit results
should be dismissed, it’s just more of the theme we’ve seen for two years. Germany and others have moved, presumably because they remain deeply concerned,
but incrementally in a way that may bring some calm but in no way gets ahead of
the crisis.
EU Summit: Bono's back from the edge... – Saxo
Bank
The outcome of the EU summit was undeniably a
positive, particularly in comparison to previous summits, but as the dust
settles the markets will have to decide whether the announced measures are
enough. Sadly, in my opinion, they are not.
Who Was The Real Victor in Brussels? – Pension Pulse
Who Was The Real Victor in Brussels? – Pension Pulse
It’s an ESMergency – alphaville
/ FT
Finland and the Netherlands own around 1.8 per cent and 5.7 per cent of shares in the ESM according
to Annex II. It isn’t close to the more than 15 per cent stake which they’d
need to block ‘emergency’ bond-buying.
Euro Crisis: 366 Days Later – PragCap
A look back
at the “Greece is saved”, LTRO1 and LTRO2 rallies: It is important to understand that the “agreement” reached last week
was nothing more than political posturing and is, as usual, long on hope and
short on details.
The Failure Of The Firewall – Mark Grant / ZH
Europe has placed its full concentration on the totally wrong aspect of the problem which has been to ward off the evil spirits of the bond vigilantes instead of on fixing the financial problems of the nations and so the problems continue and worsen…We also learned over the weekend that various takes on the Summit were not all the same as Ms. Merkel’s version differed significantly from the Spanish tale.
Europe has placed its full concentration on the totally wrong aspect of the problem which has been to ward off the evil spirits of the bond vigilantes instead of on fixing the financial problems of the nations and so the problems continue and worsen…We also learned over the weekend that various takes on the Summit were not all the same as Ms. Merkel’s version differed significantly from the Spanish tale.
The Terrible Cost of Inaction in Europe – PIIE
The European leaders this time have offered a more hopeful approach than in the past in both form and substance, but Europe could still be headed in the wrong direction unless the ECB builds an appropriate bridge on the structure of the decisions taken at the June summit and the political process implements those decisions comprehensively and expeditiously.
The European leaders this time have offered a more hopeful approach than in the past in both form and substance, but Europe could still be headed in the wrong direction unless the ECB builds an appropriate bridge on the structure of the decisions taken at the June summit and the political process implements those decisions comprehensively and expeditiously.
A Banking Union Baby Step – Project
Syndicate
Daniel
Gros: This incremental approach has
worked well in the past; indeed, today’s European Union resulted from it. But a
financial crisis does not give policymakers the time that they once had to
explain to voters why one step required another. They will have to walk much
more quickly to save the euro.
Europe’s bank recapitalisation: The creation of
a new stigma? – Saxo
Bank
Why the EU summit decisions may destabilise
government bond markets – voxeu.org
Paul De
Grauwe: Among the questions still
remaining since last week’s summit of European leaders is whether the new
measures will stabilise government bond markets. This column’s answer is ‘no’.
Update 3-July
Analysis: Sharing a vision may be Europe's biggest challenge – Reuters
It's 2025 and Angela Merkel, Europe's first democratically elected
president, is reviewing a crowded agenda for the new session of the
increasingly powerful European Parliament.
Successful summit didn’t solve crisis – Hugo
Dixon / Reuters
Europe’s people are not ready for full political union. So the best solution
would be to keep the loss of sovereignty and debt-sharing down to the minimum.
But the summit kicked these big issues into touch.
EU Summit Winner Was Merkel – Mish’s
What the EU agreed last week, what it did not
and what happens next
– euobserver
Update 4-July
Winning the Summit but Losing the War;
Merkel Coalition About to Splinter Over Creation of "European Monster State" – Mish’s
The IMF and the rest of The World: edging
(further) off the eurozone stage – The
World / FT
Rather than solving the Eurozone debt crisis
once and for all, the EU summit last week gummed up the bailout process with
controversy in the very country that everyone is counting on to save the
Eurozone, Germany—but also elsewhere—and nothing has been resolved.