German Chancellor Angela Merkel appeared on Wednesday before the Bundestag where she explained the agreements reached at last week's EU summit.
She emphasized that if EU countries consistently carry out the fiscal consolidation plan agreed upon last Friday, "then Europe will not only overcome this crisis, but Europe will emerge from this crisis stronger than when it went into it." She also defined the process of creating the fiscal union as "irreversible."
The German Chancellor assured that the UK remains a key member of the EU, despite British PM David Cameron's rejection of the new treaty. She also repeated that she does not consider the creation of eurobonds the right way to combat the debt crisis.
Moreover, during the European morning Germany and Italy auctioned bonds. The Bundesbank sold €4.18 billion of 2-year bills at a reasonable average yield of 0.29%. Italy did not have the same luck, selling €3 billion of 5-year bills at a new record high yield of 6.47%. France has already canceled its auction scheduled for December 27.
Andrew Wilkinson from Miller Tabak argues that this fall might nevertheless have some positive consequences: "And so the crisis continues to wear down the value of the euro, which midweek fell to its weakest against the US dollar since January 12 at $1.2965. While this is symptomatic of a deepening crisis, behind the scenes European leaders will likely welcome the impact a softer euro might deliver in terms of improving export competitiveness."
The cascade of bank downgrades continuesFitch rating agency dowgraded five major European banks at the US close. The lower note goes to Rabobank, cut to AA; outlook stable, OP Pohjola, cut to A=; outlook stable, Danske Bank, cut to A; outlook negative, BFCM, cut to A; outlook stable, Credit Agricole, cut to A= from AA-; outlook stable. Fitch rating agencies does not stop there, and says that the recent EU summit did more harm than good, as "it reinforced inherent complexities of 'resolving' the crisis."
As read in the official release: "In conjunction with a broad review of the ratings for the largest banking institutions in the world, Fitch Ratings has completed its assessment of the large and relatively highly rated European banks. The review has resulted in a series of rating actions announced in the fourth quarter of this year, including today's downgrades of the long-term Issuer Default Ratings (IDRs) and the Viability Ratings (VRs) of five major European commercial banks and co-operative banking groups. Today's actions resolve the Rating Watch Negative placed on these banks' ratings on 13 Oct. 2011."
Forget about the Fed bailing out EuropeDespite the market is well aware that the Federal Reserve has enough on having to deal with its own domestic miseries, Chairman Ben Bernanke reaffirmed that the Fed will not provide bailout funds to support European banks or nations, he told Republican senators on Wednesday.
As reported by Reuters: "We're all concerned, is the American taxpayer going to be bailing out European nations and banks," Senator Lindsey Graham told reporters after a meeting with the Fed chairman. "He said, no, he doesn't have the intention or authority to do that," Graham said.