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EU Summit Was a True Success for the Eurozone
Pinnacle Digest writes: Axel Merk explains that the Eurozone leaders have finally made a strategic move with true substance. Merk stated that for the first time in months, there’s a sensible path forward.
Despite all the political posturing leading up to the EU Summit last week, with Mario Monti giving anti-Merkel speeches in Italy and Merkel stating there would be no Eurobonds while she is alive, the meeting of all the heads proved to be extremely productive. And unlike many of its past meetings, where leaders made commitments that were half-heartedly followed through on, this meeting defined clear and concise objectives. Merkel left without committing to things she did not want, and the market roared higher immediately following.
German Chancellor Merkel achieved what she set out to do:
• The European Stability Mechanism (ESM) does not receive a banking license;
• No Eurozone bonds have been announced;
• No Eurozone wide bank guarantees have been announced.
Axel Merk states in his article that “While most focus on who gets how much money, the only relevant question is whether the Eurozone is heading towards a sustainable path, both politically and fiscally. To get there, European Central Bank (ECB) President Draghi recently stipulated the Eurozone requires roles, deadlines and conditions to be set. In our assessment, the fireworks in the markets were justified because of progress made in a key area: the banking sector.”
Also, Merkel won another victory at the summit when stating that throwing good money after bad would be a huge mistake (in respect to helping Spanish banks). She recommends, and will likely get her way in the end, that if Spanish banks (or other struggling banking systems) want their deposits guaranteed (to prevent bank runs) they must give up control of their own regulatory system. This would lead to a loss of sovereignty in many respects.
Click here to read what Axel Merk forecasts for the Eurozone moving forward.