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Crisis Theater: Forget the English and sign the treaty?

La sede della Banca Centrale Europea, a Franco...

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The new promised fiscal union turned out to be more successful than expected with not just the 17 Euro nations but most except Sweden, The Czech and Hungary need to go back to their Parliaments(Economist) the English have skipped a beat or so as the 23 nations sign a fresh treaty after the Common market and the currency Euro survived two decades and one decade respectively.

Along with the new pact, the EU also notified that it would try to add EUR 200 mln to IMF to make available for the European Crisis and that the European stability Facility would be fast forwarded by a year to June 2012 as banks complete the Capital fill deadline

The widespread discontent about stronger fiscal union seemed to have been driven away by the blues and the talks of eCB needing to become  abank lost by France and others as today’s press notices would declare the new treaty and ECB defence along the lines of the German option with the nations standing behind the currency without asking for common Eurobonds aor a $2 tln ECB and instead walking it step by step in a new fiscal communion that rides on a singular discipline for following the deficit targets, the budgets and the penalties for crossing the same.

Despite news of the destabilising Euro, the currency is at its best, even moving up to 1.34 twice in two days before losing a cent or two cents sharply in the early morning trade. It still looks like the currency will take its time to break 1.30 to lower levels. Draghi’s second meeting of the ECB yesterday produced a (promised) 25 bp rate cut to 1% but did not give away anything to those expecting Euro to be broken without a bigger bond buying program

Stress Tests, Capital Gap and the European Central Bank

The EBA stress tests also parked the capital requirements ont he banks in a much more transparent manner with Germany alone ending up with a bill for EUR 13.5 bln, Deutsche Bank alone liable to add EUR 3.2 bln in Capital and Commerzbank that suffered greatly iin the markets yesterday liable for a capital gap of EUR 5.3 bln that it has to fill before June 2012

Though S&P awaits for Friday’s announcements to act on banks as well,  Moody’s went ahead with French Bank downgrades at BNP, CA and SocGen without working up another argument finally seeming like we could split the blame on the banks and move ahead with fiscal consolidation in the Euro It is looking like more of the work will be done by banks now and sovereigns will just close the gap ont heir deficits

The two-speed zone threat on the european Union however is more or less just a marginalised David Cameron and UK with eeveryone else mostly on the same vacation bus, drinking the same beer

The FT mentions the deliberations in concise detail

However, arriving for the crunch summit’s second day, Angela Merkel, the German chancellor who had hoped to secure a deal with all 27 EU members, said: “We’re very pleased with the result. Yesterday was no weak compromise for the euro.”

The leaders said the new treaty would be signed by March.

José Manuel Barroso, the Commission president, said he believed there were ways to work round the deal’s legal difficulties. But senior EU officials acknowledged it would be difficult to give Brussels new powers over eurozone national budgets outside the EU treaties, and diplomats expressed concern financial markets would not see the new pact as credible.

The UK became the biggest stumbling block to a deal between all 27 countries, diplomats said, with David Cameron, prime minister, holding out for hours in the hope of getting concessions for the its financial services industry.

“Very simply, in order to accept the reform of the treaty at 27, David Cameron asked for what we thought was unacceptable: a protocol to exonerate the UK from financial services regulation,” said Nicolas Sarkozy, the French president. “We could not accept this as at least part of the problems [Europe is facing] came from this sector.”


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