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Euro Day: EU leaders won’t leave Brussels summit until agreement is reached

Thursday, December 8th 2011 - 06:55 UTC
Full article 13 comments
Central banker Mario Draghi emerging as an important figure of the puzzle Central banker Mario Draghi emerging as an important figure of the puzzle

Pessimistic comments from Germany and new figures exposing deepening stress among Europe's banks dented financial market hopes of a turning point in the Euro zone's debt crisis at a summit this week.

President Nicolas Sarkozy and Chancellor Angela Merkel detailed their plan to amend the EU treaty to anchor stricter budget discipline in the Euro area in a letter to European Council President Herman Van Rompuy on Wednesday.

Merkel also spoke by telephone with US President Barack Obama, agreeing on the need to find a lasting and credible solution to the crisis, the White House said.

The French finance minister said the leaders of France and Germany would not leave Friday's European Union summit until a “powerful” deal is reached to restore market trust and prevent the sovereign debt crisis spiralling out of control.

But while Paris voiced determination, a senior German official gave a downbeat assessment of prospects for an agreement in an apparent effort to jolt partners into accepting Berlin's terms and respecting its red lines.

“I have to say today, on Wednesday, that I am more pessimistic than last week about reaching an overall deal ... A lot of protagonists still have not understood how serious the situation is,” the official told a pre-summit briefing.

“My pessimism stems from the overall picture that I see at this point, in which institutions and member states will have to move on many points to make possible the new treaty rules that we are aiming for,” he said, speaking on condition of anonymity.

The euro slipped, share prices turned negative and safe-haven German bond futures rose after the official punctured investors' hopes of a crisis solution, although some diplomats played down his comments as pre-summit brinkmanship.

After several days of recovery, Italian and Spanish bond yields rose sharply as money fled the two most endangered Euro zone sovereigns for the relative safe haven of the region's strongest sovereign, Germany.

Euro zone sources said the ECB was closely involved in discussing plans for tighter Euro zone fiscal and economic integration before the summit, and Draghi would meet Merkel and Sarkozy in Brussels on Thursday evening.

Draghi signalled last week that a Euro zone “fiscal compact” could enable the ECB to act more forcefully. The sources said he wanted a firm commitment set in stone that Euro zone countries were moving towards a fiscal union before stepping up crisis-fighting measures.

The ECB governing council holds a crucial meeting on Thursday, before the EU summit, at which most economists expect it to cut interest rates to 1.0% from 1.25%, introduce longer-term liquidity tenders for banks and widen the collateral they can use to borrow from it.

Ratings agency Standard & Poor's heightened the sense of crisis this week by warning it could cut credit ratings across the 17-nation currency bloc, including for its EFSF rescue fund, a move that would fundamentally weaken it.


Categories: Economy, Politics, International.

Top Comments

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  • briton

    EU leaders won’t leave Brussels summit until agreement is reached
    They said that yesterday, and the week before, and the week before that,
    5 days to save it, two weeks to save it, 3 months to save,
    They waste billions and don’t even know what the hell they are saving,
    except maybe their pockets .
    the sooner it all collapses the better,

    Dec 08th, 2011 - 02:32 pm 0
  • ElaineB

    Lock them in a room with bread and water and don't let them out until they stop this pissing contest. Merkel just lectured everyone to leave their egos aside. *coughs*

    Dec 08th, 2011 - 02:37 pm 0
  • Marcos Alejandro

    Lock them in a room with bread and water and don't let them out until they decide to get the hell out of Malvinas, that will save London a lot of money.

    Dec 08th, 2011 - 04:16 pm 0
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