Germany Shoots Down ‘Dreams’ of Swift Fix

Discussion in 'Wall St. News' started by THE-BEAKER, Oct 18, 2011.


    Germany said European Union leaders won’t provide the complete fix to the euro-area debt crisis that global policy makers are pushing for at an Oct. 23 summit.

    German Chancellor Angela Merkel has made it clear that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled,” Steffen Seibert, Merkel’s chief spokesman, said at a briefing in Berlin today. The search for an end to the crisis “surely extends well into next year.”

    Group of 20 finance ministers and central bankers concluded weekend talks in Paris endorsing parts of Europe’s emerging plan to avoid a Greek default, bolster banks and curb contagion. Providing a week to act, they set the Oct. 23 meeting of European leaders in Brussels as the deadline.

    On the summit agenda is how any recapitalization of Europe’s banks “might be carried out in a coordinated way” and how to make the European Financial Stability Facility, the EU’s rescue fund for indebted states, as effective as possible, Seibert said. The leaders will also discuss aid for Greece and ways to tighten economic and financial policy, he said.

    The euro retreated as much as 1 percent to $1.3739 from a one-month high against the dollar after Seibert’s comments. The currency last week had its biggest gain in more than two years on speculation that policy makers were moving closer to stemming the crisis. German 10-year bonds rallied and the Stoxx Europe 600 Index reversed an advance of as much as 1.5 percent and was down 1.4 percent at 4.45 p.m. in Frankfurt.
    ‘Disappointment Trade’

    Seibert’s statement “moved the disappointment trade to this morning,” Carl Weinberg, founder and chief economist at High Frequency Economics, said today on Bloomberg Television. “We’re looking at a really big disappointment if we don’t get a funded, operational and agile response to the bank recapitalization problem as soon as possible.”

    Two years to the week since Greece triggered the turmoil by revising its budget math, policy makers face increasing calls from the U.S. and other global partners to stamp out the turmoil that has pushed the Greek government to the edge of default and the European economy close to recession.

    The outlook for German economic growth has worsened as companies cut their business expectations and foreign orders decline, the Bundesbank, Germany’s central bank, said in its monthly report today.