Greek and others European national flags flutter near an euro symbol outside the EU Parliament in Brussels.FRANCOIS LENOIR/Reuters
The stock market likes what it sees in Europe right now, but it is hard to know exactly what that is. Just about everywhere you looked on Friday, stocks were rallying: The Dow Jones industrial average was up 1.4 per cent, Germany's DAX was up 1.9 per cent and France's CAC 40 was up 2.4 per cent.
But the backdrop, at least according to many of the online sources I've checked in with, is hardly upbeat – at least as it pertains to the summit over the European debt crisis.
Here's Paul Krugman at the New York Times: "European stocks are up today, and I have no idea why. I'm with Felix Salmon – this looks like a disastrous meeting. More austerity, more posing of the crisis, wrongly, as being all about fiscal deficits; no mechanism for ECB funding. Somehow southern Europe is supposed to deflate its way to prosperity, while everyone runs a trade surplus, presumably against that potentially habitable planet we've discovered 600 light-years away."
And here's a snippet from the Felix Salmon article that Mr. Krugman references: "A continent which has risen to multiple occasions over the past 66 years has, in 2011, decided to implode in a spectacle of pathetic ignominy. Its individual countries will survive, of course, albeit in unnecessarily straitened circumstances. But the dream of European unity is dissolving in real time, as the eyes of the world look on in disbelief. Europe's leaders have set a course which leads directly to a gruesome global recession, before we've even recovered from the last one."
The Daily Mail (via Zero Hedge) has focused on how France's Nicolas Sarkozy snubbed the U.K.'s David Cameron at the summit: "This is the moment that Nicolas Sarkozy demonstrates exactly what he really thinks of David Cameron's veto of the EU Treaty change."
Meanwhile, the bond market is taking a more cautious approach, with yields on European government bonds down only slightly. The yield on the 10-year Italian government bond fell 13 basis points (or 0.13 percentage points), to 6.3 per cent. The yield is moving in the right direction, but it still has a looooong way to go.
David Berman