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Merkel - No to Eurobonds

Last updated 12/2/2011 3:45 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

German Chancellor Angela Merkel stated today that development towards a fiscal union was on the agenda for the EU Summit scheduled for December 9th. Speaking in Berlin, Ms. Merkel also stated that the EU crisis may take years to resolve as she tried to temper market expectations ahead of the meeting. She also reiterated her opposition to the idea of Eurobonds which many market analysts believe is the only viable long term solution to the current sovereign debt crisis.

Ms. Merkel’s stark refusal to establish an institutional framework to mutualize credit risk in the region suggests that Germany is not yet ready to commit to the type of fiscal integration that the market deems necessary and may therefore result in investor disappoint on December 9th.

In other news   China’s Vice Foreign Minister Fu Ying said at a forum in Beijing today that China cannot use its foreign exchange reserves to rescue other countries. Ms. Fu stated that China's reserves are akin to the country's savings and that the 1997 Asian financial crisis taught Beijing how important reserves are to the nation. Ms. Fu’s comments reiterated the notion that China will not act a buyer of last resort in the case of full blown crisis in the Eurozone, indicating that EZ authorities will need to come up with an organic solution towards solving their sovereign debt problems.   

Risk currencies were mildly higher in quiet pre-NFP trade boosted by strong rise in European equities. With little economic news on the calendar trading is expected to remain muted until the release of US data due at 13:30 GMT.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.