After Moody’s did earlier today, Fitch is giving its thoughts on Friday’s EU summit. “It seems that a ‘comprehensive solution’ to the current crisis is not on offer.” They acknowledged the initiation of an “institutional and policy framework for a more viable eurozone and ultimately greater fiscal union, but taking the gradualist approach imposes additional economic and financial costs compared with an immediate comprehensive solution. It means the crisis will continue at varying levels of intensity throughout 2012 and probably beyond, until the region is able to sustain broad economic recovery.” Fitch didn’t define what a ‘comprehensive solution’ would look like however. On the ECB Fitch believes they are “the only truly credible firewall against liquidity and even solvency crisis in Europe.” “Hopes that the ECB would step up its actions in support of its sovereign shareholders as a quid pro quo for institutional and legal changes that gave the ECB greater confidence in the long run commitment of eurozone governments to fiscal discipline appear to have been misplaced.” It is this lack of ECB step up in its actions that I believe the markets are most upset with.

Category: Analysts, MacroNotes

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3 Responses to “Fitch comments on EU summit results”

  1. dead hobo says:

    On one hand, it’s most excellent that the markets are keeping the pressure on Europe as without it, you could draw an accurate picture of the EU as a bumbling group of zeppelin enthusiasts and chaps who argue vociferously with bushes and trees, and lose. Then they spend money to feel good about thenselves.

    Thanks to the scrutiny, they are moving in the right direction and might even be building momentum. I personally think things will end well, but the scrutiny must continue.

    Then, on to Washington and our debt issues.

  2. dead hobo says:

    PS: I think the ECB will step up with gravitas when the EU puts the zeppelins away, deflates them, and completed the 12 step process it has embarked on.

  3. The Eurozone is at a fork-in-the-road which will determine its strategy path for perhaps generations. In both Canada & the USA, a significant amount of federal tax revenues from the “have” states/provinces are diverted to the “have not” states/provinces/territories as a form of income redistribution. Some of the larger sports franchises have similar schemes to deal with non-metropolitan markets. What we are witnessing in the Eurozone is a quest by socialist movements for similar action.

    The current problems exist ‘cuz the PIIGS are living beyond their means. The common currency does not afford them the conventional means to structural corrections, so they are really left with only two paths: ask the wealthy nations to subsidize the lower productivity of the periphery countries; or continue the austerity actions and augment this with measures that introduce wage freezes/deflation etc with the goal of making them viable (again) for domestic and satellite commerce.