Ashburton comments on EU Summit outcomes
- Results from EU Summit were the best that could have been expected
- Talk about Merkel being "outflanked" is exaggerated
- The Summit statement is weakened by the likes of seniority for the Greek bailout, ESM lending, and ECB SMP purchases
Derry Pickford, Macro analyst at Ashburton, comments following the EU summit:
“Germany's red lines were not crossed but, nonetheless, the results were as good as we could have expected from the Summit. There are two important caveats: (i) expectations were very low (initial expectations were so pessimistic it wouldn't take much to create a market bounce); (ii) the measures are short-term analgesics rather than fundamental cures.
“Recent talk about Merkel being "outflanked" is exaggerated and although she is isolated the argument for switching sides so that France can force Germany into Eurobonds and a growth orientated fiscal policy is far-fetched. This theory is dependent on Germany giving into non-credible threats. This seems unlikely.”
Was the Summit statement the first sign of a more sensible approach to seniority?
“One of the biggest errors that European policy makers have made is the insistence of seniority for the Greek bailout, ESM lending, and ECB SMP purchases. The first weakening of this was seen today: the financing of Spanish banks from the EFSF (which doesn't have seniority) when transferred to the ESM would not acquire seniority status.”
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