The EU Summit, which was supposed to save Europe in the present, has morphed into a forum for leaders to spell out a vising of the future. The EU is talking about adopting a 5-10 year roadmap for greater integration.
That’s nice, probably even necessary, but it’s like the captain of the Titanic talking about his retirement plans as the ship steams toward the iceberg. Heck, you could argue the ship has already hit the iceberg.
Yet leaders are sipping tea in Brussels and dreaming about United States of Europe. What they need is a summit where leaders are laser-focused on bringing down yields and bringing up growth.
If anything, laying out grandiose plans right now will alienate voters who are questioning the whole experiment. I don’t imagine giving Brussels the power to rewrite budgets is politically feasible and would certainly be disastrous if ever used.
At best, an agreement on a banking union may come from the summit but implementation is probably a year away.
The risk to euro shorts is something like October 10, when Merkozy leaders pledged to present a comprehensive package to end the crisis. That sparked the largest one-day euro rally in 3 months. The optimism continued for the remainder of the month before the euro reversed and fell to new lows.
At that meeting, there were plenty of proclamations about banks and Greece but story ended like this
Many economists say confidence in euro-zone banks will only be restored when Europe acts to dispel fears of a government debt crisis in Italy and Spain.
…it will end the same way on Friday, only the market will be quicker to judge.
