The upcoming European Union summit is doing little to help calm nerves right now. While there are grand plans being laid, few people expect a true breakthrough from the summit, and there is an expectation that the situation will remain largely the same at the end of the meeting.
One of the plans that might be presented at the meeting is expected to be the proposition of a tighter European Union. A document that is expected to be presented by EU officials Herman Van Rompuy, Jose Manuel Barroso, Mario Draghi, and Jean-Claude Juncker requires a very tight watch on member state budgets going forward. The draft document suggests that EU governments decide on acceptable debt levels, and then enforce them. The document, if accepted, would allow the European Union to actually rewrite member states’ budgets when they do not adhere to the rules.
It will be interesting to see how that situation plays out. But, for now, what’s really weighing on the euro is the fact that, once again, Italian and Spanish bond yields are higher. As long as yields keep rising, it remains difficult for those countries to afford their debt, and it increases the chances that further aid will be needed to stave off more problems.
At 15:13 GMT EUR/USD is down to 1.2460 from the open at 1.2504. EUR/GBP is down to 0.7991 from the open at 0.8029.
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