These are stories Report on Business is following Monday, June 25, 2012.
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EU summit could be 'fiasco'
I think George Soros may be underestimating the ability of Europe's leaders to drag this thing on, but he does warn that the next three days are crucial if they are to prove to markets that they're serious about saving the euro.
The renowned investor was referring in an interview with Bloomberg Television to another European Union summit, to be held Thursday and Friday, warning that the EU leaders must take concrete steps to ease a crisis that has raged for more than two years.
"There is a disagreement on the fiscal side," Mr. Soros said.
"Unless that is resolved in the next three days, then I am afraid the summit could turn out to be a fiasco. That could actually be fatal."
Like others, Mr. Soros suggests a European fund that would issue common debt, funds from which would be used to buy bonds from ailing countries to help bring down their borrowing costs.
Europe's ailing economies, he added, need growth initiatives rather than austerity. And while German Chancellor Angela Merkel is a strong leader, "unfortunately, she has been leading Europe in the wrong direction."
As for the summit, expectations aren't high, given the numerous kicks at the can to date. A meeting among the leaders of Germany, France, Italy and Spain on Friday achieved nothing.
"If low expectations are the secret to being happy when your football team is knocked out on penalties (again) then it's a good thing that expectations ahead of the EU Summit are very low indeed," said Kit Juckes, the chief of foreign exchange at Société Générale.
"Friday's mini-meeting delivered nothing and no one expects much this week."
Indeed, leaders agreed on an initiative at Friday's meeting, but there were no details and, seemingly, little progress. Spain, meanwhile, formally asked for a massive bailout of its banks today.
"Last week's four leader summit in Rome between Italy, Spain, France and Germany agreed on a growth package of €130-billion, or 1 per cent of euro GDP, which would be discussed at this week's EU summit's but it was light on detail," said senior analyst Michael Hewson of CMC Markets.
"Any hopes that Italy's Monti, Spain's Rajoy and France's Hollande had of persuading German Chancellor Angela Merkel of bowing to pressure for mutualization of banking debts and euro bonds were soon dashed as she remained steadfast in her opposition to them."
Thus, this weekend's meeting hasn't raised too much in the way of hope.
"As Galbraith said, 'meetings are indispensable when you don't want to do anything," said strategists at RBC Dominion Securities.
"We are optimistic that such a low benchmark will be cleared, but ... the best we can realistically hope for is a road map with all the right elements and common (political) agreement on these. EU President Van Rompuy stated that such a blueprint would include discussions around euro bills, the European Redemption Fund proposal and a future banking union."
- Spain asks Europe for bank rescue
- Eric Reguly: Greece's awful dilemma - the drachma, or the Eurocrats
- Doug Saunders: All roads lead to Berlin
Butt out, Germany says
The Europeans aren't taking too kindly to the advice they're getting.
They've already told Canada to keep its nose out of their business. (Actually, I think what they want is for Canada to kick in money to the International Monetary Fund to help save the failing European economies, and then keep its nose out of their business, but it has said it doesn't need to be lectured.)
Now, Germany's Finance Minister Wolfgang Schaeuble is telling President Barack Obama to get his own house in order rather than pushing Europe to speed up its efforts to ease the debt crisis.
"Mr. Obama should first of all take care of reducing the American deficit, which is higher than in the euro zone," he told a broadcaster interviewer.
Markets troubled
Global stock markets are weak so far today as the euro crisis plays on.
"Following England's exit from the football last night, investors have re-focused their attention on other European events with a similarly predictable result," said David Jones, chief market strategist at IG Index in London.
"With a European summit on Thursday, Italian and Spanish bond auctions on Tuesday and Spain kicking off the week by formally requesting aid for its banks once again, it will be the debt crisis that governs sentiment."
Tokyo's Nikkei slipped 0.4 per cent today, though Hong Kong's Hang Seng climbed 0.3 per cent. European stocks slipped, followed by North American markets.
London's FTSE 100, Germany's DAX and the Paris CAC 40 were down by between 0.8 per cent and 1.8 per cent by about 8:30 a.m. Dow Jones industrial average and S&P 500 futures also slipped.
"Here we are, the final week of June, about to embark on the second half of 2012, and unfortunately, the state of the global economy is not strong," said senior economist Jennifer Lee of BMO Nesbitt Burns.
"The painful, ongoing problems in Europe continue to be felt around the world and there is no quick fix," she added.
"There is a lot of pressure for some type of solution to be announced during this week's two-day EU Summit in Brussels (which begins Thursday …. next ones are in October and December) but markets may be setting themselves up for disappointment. It is highly unlikely that the group will come up with a solution that the market will like for more than 10 minutes. (And George Soros' comments this morning that unless the fiscal disagreement is resolved in the next few days, 'then I am afraid the summit could turn out to be a fiasco. That could actually be fatal' aren't helping.)"