Sunday, December 11, 2011

Tough Eurozone Talk could be Good News for Investors

Tough talk and sleepless nights accompanied the 15th Eurozone economic summit in two years in Brussels. Each rumor and comment sent markets strongly up and down throughout the week. In the end, agreements pointed toward improved government budgetary rules within the European Union and additional European Central Bank assistance to European commercial banks. German Finance Minister Wolfgang Schaeuble said, "I am certain that we will be able to handle the debt crisis in Europe with the agreed, far-reaching measures on institutional reform of the European currency union". On Friday, investors welcomed the good news.

It may be premature to provide an “all is clear” signal, but any progress in the Eurozone is good news. Details need to be worked out and the summit may not have adequately addressed Eurozone sovereign debt risks. Initial commentary has been skeptical, but recently the markets have absorbed a lot of bad news. Eurozone leaders need to address the concerns of the skeptics (and avoid internal disputes) during the next few weeks in order to assure their credibility and stabilize markets.

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