Another day, another eurozone summit. With European finance ministers set to gather in Brussels to fill in the details of last month’s bailout agreement for Spanish banks, nervous investors have already signaled their pessimism, pushing Spanish bond yields above the danger zone of 7 percent. (In stark contrast, German bond yields fell into negative territory; investors, it seems, are so concerned with the stability of the rest of the continent that they are prepared to pay to let the German government hold their money.)The BBC has more:
The finance ministers are likely to confirm the size of the bailout and which conditions will be applied to the loans, both for the banks and the government.It has also been reported that on Tuesday, Spain will be given an extra year to bring its budget deficit down to the permitted level.Among the key agreements from the 29 June summit were moves towards banking union with the European Central Bank (ECB) acting as a supervisor and allowing European bailout funds to buy bonds to try to reduce countries’ borrowing costs.But since the summit, there have been signs that Finland and the Netherlands would oppose the use of bailout funds in this way.
It was only a week ago that Eurocrats were hailing the June 29 summit as a major breakthrough. Clearly, the summit effect has already worn off; bond yields are back where they were before the magic fix. Finance ministers at today’s meeting will be looking for a another magic communique to keep financial Armageddon at bay for a few more days or weeks. We, and our retirement portfolios, wish them every success in the world.But before the ink is dry on this next set of “final” agreements and “breakthroughs”, it will be time to plan yet another chicken wire and spit party to put yet another magic, cure all solution for Europe’s woes together and calm the markets for a few more days.Nothing, absolutely nothing, about this situation is good.