In 1914, an economically healthy Europe was divided into armed camps. In the 1930s, an economically destitute Europe was divided into armed camps. Now, an economically unhealthy Europe is again divided into camps. This time, a military confrontation is thankfully not in the cards, but the handwriting is on the wall for economic and financial warfare. Every time Europeans leaders get together, hope soon gives way to despair. The lesson is that no matter how bad things are, they find a way to make things worse. Who would have thought that this time it would be the Brits who, fearful that agreements brokered by the Germans and French would weaken The City (London’s Wall Street), would escalate the crisis to a new and more dangerous level?
The European Union failed to secure backing from all 27 countries to change the EU treaty at a summit Friday, meaning any deal will now likely involve the 17 euro zone countries plus any others that want to join, three EU diplomats said.
An agreement at 27 fell through after British Prime Minister David Cameron demanded concessions that Germany and France were not willing to give, one of the officials said.
During nearly 10 hours of talks that lasted into the night, EU leaders did manage to reach agreement on a ceiling for the size of the euro zone’s permanent bailout fund, the ESM, saying it would be capped at 500 billion euros.
That figure will be reviewed in July next year, when the ESM is due to come into force, the diplomats said.
The leaders also agreed to explore the idea of providing bilateral loans to the International Monetary Fund totalling 200 billion euros, with 150 billion of that coming from the euro zone , to bolster IMF resources to tackle Europe’s debt crisis.
If market participants ignore this development, I’ll be forced to conclude that they’ve taken leave of their senses.
[An earlier report providing background from The Guardian]