STOCK MARKET WATCH -- Friday, 29 June 2012

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42. Did Merkel Just Get Trounced?

http://www.businessinsider.com/did-merkel-just-get-trounced-2012-6

So far, investors have argued that German Chancellor Angela Merkel has been the big loser at this week's EU summit.
Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy pushed an agenda to depress their borrowing costs and save their banks, forcing Germany to retrace its aversion to bailing out Southern Europe.
Further, Spain's bailout won an important concession as European institutions agreed to drop explicit seniority clauses in public funding provided to the banks.
That said, Germany saved face by requiring a banking authority to be established before Europe proceeds with plans to recapitalize banks through Europe's bailout funds. Here's the exact wording ot those contingencies from the EU summit statement released after discussions about this plan:
When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly. This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding.
Further, Germany has said that it supports a slow fiscal integration, and banking union rather than direct help for sovereigns through debt mutualization avoids moving further towards this goal without the proper financial plumbing in place.


Read more: http://www.businessinsider.com/did-merkel-just-get-trounced-2012-6#ixzz1zBCPYafa