The benefits of the announcements (lower yields on sovereign bonds and higher share prices in EU banks) will be short-lived. None of these decisions from the EU summit address the core issues facing the EU banking system: namely, insolvency and excessive leverage. No one in the EU actually has the money to make these measures work (again, Spain and Italy will provide 30% of the ESM’s funding). Markets will stage a knee jerk reaction to these measures. That reaction will see bank shares rise and yields fall, temporarily. But this move will be short-lived, just as moves following LTRO1 and LTRO 2 were. After all, these announcements are just more political measures than anything else. And Europe needs capital NOT politics at this point. So I would expect this rally and the drop in bonds to be short-lived. EU leaders may have put off the Crisis by a few weeks (or perhaps even a month). But they still haven’t addressed the core issues causing the Crisis: excess leverage courtesy of hundreds of billions of Euros’ worth of garbage debt. –Zero Hedge – Phoenix Capital
http://www.zerohedge.com/contributed/2012-06-29/eu-summit-europe-needs-capital-not-political-posturing
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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