Postcard From Brussels

• Posted by Robert Sinn
• on October 25th, 2011

Europe’s leaders have agreed that they can’t agree on anything substantive and that they will have an endless series of meetings to talk about things which they have already talked about. Meanwhile, Italy’s government is in a state of complete chaos as Berlusconi desperately attempts to glue his battered coalition together. In addition, the much anticipated EFSF leverage announcement appears set to fall well short of market hopes as the final amount of leverage depends on “investor interest”.

Remember Greece? Well, the eurozone braintrust is trying to figure out how to cut the debt to a more sustainable level (while the country’s economy is in a nosedive incapable of sustaining even a 40% debt/GDP ratio) without triggering a credit event. From the FT:

“There are limits, however, to what could be considered voluntary,” said Charles Dallara, managing director and chief negotiator for the Institute of International Finance, representing bondholders

More uncertainty, more rumors, failed promises, delayed meetings & announcements all of which extract a steepening toll on economic confidence throughout Europe. I expect that we will see the impact from this latest round of eurozone inaction and indecision in economic data (most notably GDP and consumer confidence) for months to come. Finally, it must be remembered that Italy and Spain would be unable to finance themselves at anywhere close to affordable interest rates if it weren’t for continued ECB intervention in sovereign debt markets – thus far, nothing that I have seen proposed or rumored has brought forth a credible long term solution to this core issue.

WSJ- European Leaders at Odds on Debt Deal

FT- Fears euro summit could miss final deal

Late Update From Reuters: Conclusive summit deal on euro zone crisis looks elusive

 

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