- rescue funding would be made available to help Spain’s fragile banking system and to buy Italian sovereign bonds,
- the European Central Bank would move forward with a plan to oversee Eurozone banks and
- €120bn of funding will be made available to stimulate economic growth within the region.
- Expectations were very low for the summit, and Friday’s news does represent progress in a very protracted process - it has taken over 3 years and 19 summits for the Eurozone leaders to get to this point.
- Skepticism remains high about the ability for diverse Eurozone interest groups to deliver on Friday’s plans. Given the almost glacial pace of progress, investors should recalibrate expectations for a quick fix, as there are many details to work out. Government deficits remain high and debates continue on austerity driven budget cuts and growth driven spending programs. The a significant challenge in resolving the Eurozone’s problems is that they are financial, political and cultural – how much control will Eurozone member countries hand over to a central authority such as the European Central Bank?
- For now, global investors can seek comfort that the Euro currency will not imminently collapse, but they are left wondering if the actions from summit number 19 are simply the result of a “shotgun wedding”.
- Note: Among the euphoria of Friday’s market moves, Nike Inc. was down 9.4% based on disappointing earnings driven partially by weakness in Europe and China, and Ford Motor Company was down 5% after announcing that “our operations outside of North America are under increasing pressure." There may be light, but there are still clouds.