The euro and European stocks have risen modestly, but markets aren’t exactly full of
enthusiasm about Angela Merkel and Nicolas Sarkozy’s announcement on the eurozone crisis yesterday. As usual, the German and French leaders were glaringly short on detail. Meanwhile, one of the few
things they were clear about – doing “whatever is necessary for the recapitalisation of our banks” – is fuelling worries that any financial help for banks will further weaken
the credit quality of EU governments’ debts.
Merkel and Sarkozy said they would present a “comprehensive” response to Greece’s and the EU’s problems as well as a bank recapitalization strategy by the end of the month. In other words, they plan to have a plan. This vagueness, particularly on the exact role the EFSF fund will play, only makes investors more jittery. “The lack of details suggests to us that there is for the time being no such thing as a comprehensive plan,” notes an RBS research email.
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