After yet another summit this weekend, European leaders still have not finalized a solution to save Greece from default and recapitalize Eurozone banks.
"Work is going well on the banks," French President Nicolas Sarkozy told reporters at the Brussels summit yesterday. "On the question of Greece, things are moving along. We're not there yet."
Sunday's meeting marks the 13th summit by European leaders in less than two years, and now all eyes are on the next, scheduled for Wednesday, where EU leaders have vowed to present their plan to solve Europe's sovereign debt crisis and reassure global markets contagion will be averted.
So what are the big takeaways from Sunday's meeting? There are six things of note, according to Goldman Sachs' director of macro and markets research Francesco Garzarelli and chief European economist Huw Pill, via Business Insider:
1 - A "Crew Cut" for Greece: Basically, due to deteriorating fundamentals, it's not certain that big haircuts for bondholders are an inevitability.
2 - A larger bank re-cap: The number is now up to 100-110 billion EUR.
3 - External support for the EFSF?: There's definitely chatter about more IMF/SWF/BRIC involvement to leverage the European Financial Stability Facility (EFSF), which would be viewed as a market positive.
4 - Italy Holds The Keys: Italian reforms must happen right away. Berlusconi is already holding emergency cabinet meetings.
5 -Towards Treaty Changes: There's some nascent movement to treaty changes that would see more fiscal integration.
6 - Redistributing Growth: Plans are underway for new schemes, likely via the European Investment Bank, to boost growth in the periphery.
But regardless of the final outcome, many still question the viability of the plan without a fundamental restructuring to Europe as a whole.
"Over the long term a critical factor remains the improvement of the competitiveness of not only Greece, but of all the Eurozone's weaker performing economies, including Italy and Spain," writes IHS Global Insight Chief European and U.K. Economist Howard Archer in an analysis this morning. "Without this the Eurozone will remain vulnerable to tensions and speculation over its long-term ability to survive in its current form."
James Galbraith, professor of economics at the University of Texas, agrees with this analysis but goes a bit further. He tells The Daily Ticker's Henry Blodget that what is really needed is "a complete reversal and upheaval in the ideas that presently govern Europe, [and] you'd have to have a much greater sense of European solidarity" to save the other countries.
Europe in Crisis: Impact on the United States
William Dudley, the New York Federal Reserve president, on Monday cited Europe as one of the major headwinds for the economy.
"The sovereign debt crisis in Europe has weakened the outlook for global growth and with it, U.S. exports. These problems have also contributed to pressures in financial markets globally that have resulted in a decline in stock market wealth," he says in prepared remarks for a speech at Fordham University. "In addition, some financial institutions are facing pressures to cut back lending. To date, these effects have been much more acute in Europe than in the United States, but there are spillovers to our nation, and we need to monitor them carefully."
Europe in Crisis: How It All Ends
"The peripheral countries of Europe are in deep difficulty [and] Greece in particular is being destroyed," says Galbraith, referring to forced cuts in healthcare, education and public services that have led to many violent protests. "I think [Europe's sovereign debt crisis] ends when there is a really violent blow-up on the periphery, probably originating in Greece or possibly in some other place ... . At some point the destruction of the society becomes intolerable, and that's where you'll see the flash point, it seems to me."
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