For those of us of a certain age, the fiscal language looks to be copied and pasted from the original Stability and Growth Pact with a few bells and whistles added to imply that ‘this time we mean it.’ – Steven Englander, Citigroup
More to follow.
Germany’s chancellor speaks.
RTRS –GERMANY’S MERKEL SAYS VERY SATISFIED AT AGREEMENT AT EURO SUMMIT, SAYS NOT A LOUSY COMPROMISE
RTRS -MERKEL SAYS VERY SATISFIED WITH SUMMIT DECISIONS, WORLD WILL SEE EU HAS LEARNED FROM MISTAKES
Don’t anyone laugh.
And a point made by Nomura’s Desmond Supple about a treaty of seventeen, versus the treaty of twenty-seven vetoed by the UK:
The EU may pursue a separate treaty for the EU17, but again this does not appear to be a viable solution. It is hard to envisage countries adhering to two binding Treaties and the concerns which prevented a full EU 27 Treaty change are still present for the EU 17: Finnish (small country) concerns over majority voting, Ireland’s concerns over the corporate tax rates and possible Irish concerns that it could not impose a transaction tax if the UK did not. Realistically, an EU 17 Treaty may just be a non-binding commitment to change with some longer-term hopes of Treaty change.
Terry Smith of Tullett Prebon puts it a bit more pithily (H/T Pawelmorski):
UK as isolated as someone left on the dock in Southampton as the Titanic sailed away
Meanwhile in the market, Bill Blain at Newedge is backing up the truck:
It is not the end of the world. In fact, I’ve got my buying boots on. Last night’s abject failure of European politics matters not one jot. The key thing is the ECB is providing 3 yr long term repos. So, if I was a cynical bank treasurer, i’d be filling my boots with 6-7% yields from Italy bonds, and telling my management committee what a great job I was doing. Yep. It’s that basic. As a portfolio manager for a hedge or real money fund I would be following that trade.
And Marc Ostwald at Monument Securities goes all philosophical on us:
The core question for financial markets is thus whether they wish to be the agents of change, or whether they are going to be roadkill in the process, at the moment nature appears to have the upper hand, in the same way as it did with dinosaurs or the dodo, or as that pompous charlatan Schumpeter correctly observed: “Innovation by the entrepreneur leads to gales of creative destruction” as innovations cause old inventories, ideas, technologies, skills, and equipment to become obsolete. “The question is not how capitalism administers existing structures, … [but] how it creates and destroys them.”
Please excuse this rather ponderous train of thought, but arguing about whether a car needs a repaint, when the engine of the car has rusted through and fallen out of the chassis is not an exercise in ‘enlightened self interest’.