Courtesy of Daniel Sckolnik, ETF Periscope
“Adopt the pace of nature: her secret is patience.” – Ralph Waldo Emerson
The leaders of the European Union will be gathering in Brussels later this week to address the continued downward spiral of the Eurozone. Judging by the high spikes in volatility levels that have played across the global markets this week, it would be safe to say that investors are largely unsure which direction those talks will take.
This is the fourth occasion EU leaders are convening a summit this year, and the stakes keep getting raised at each meeting. That’s because the solutions put forward always seem to fall short of investor concerns, though the shorter term fixes have so far managed to generate enough glue to hold the Eurozone together.
That may all be about to change.
To start, the news broke over the weekend that both Greece’s prime minister and finance minister might not make it to the scheduled summit due to ill health. That is certainly a hard thing to spin in a positive light, as one of the key points the EU leaders will be discussing is a new request by the Greek government to renegotiate the terms for the most recent bailout. For those with short-term memory loss, that’s the same one that was famously heralded back in February of this year as a flawed, but adequate, remedy.
Back then, EU leaders were maintaining, at least on the surface, a predominantly unified front in terms of Greece staying in the Eurozone. Compare that to the current situation, where details of contingency plans for a Greek exit are routinely to be found in statements by a wide swath of EU leaders and International Monetary Fund (IMF) executives.
Spain will remain front and center on the summit agenda as well. The results of the recent stress tests applied to Spanish banks revealed that about $80 billion in bailout funds would be required over the next two years to enable the country to handle possible “worst-case” scenarios. However, even that amount might not be adequate, according to the IMF, as that plan is designed to funnel money through the government rather than directly to the banks, and therefore fails to solve the underlying issues.
The need for a greater degree of “credit-sharing” is gravitating to the center of the conversation, one that finds Germany on one…
