You had a sense their was a rabbit lurking in the hat, but the timing and extent on Friday’s ‘relief rally’ surprised me. And, superficially, it seemed justified.
Then there’s the reality.
FT’s Wolfgang Munchau – consistently ahead of the curve – claims: ‘The Real Victor in Brussels was Merkel.’
Unfortunately I believe he makes he makes a compelling argument. Strip away the political victory laps and what really happen?
Germany’s liabilities are unchanged.
The ESM has no banking license.
Italy hasn’t really gained anything.
The move towards euro-wide banking supervision (& Spainish recaps) will be torturous.
Conclusion: Merkel stands over her ‘not in my lifetime’ Eurobonds pledge, the ESM is seriously overloaded and by the way – where on earth does the growth come from?
Germany – and remember Merkel is <rightly> contemptuous – has bought the market some time but this could be THE rally to sell.