• The markets continue to be event driven. This is in particular the case for government bond markets, but also global stock markets seem to be more sensitive to the development in the European debt crisis than signals from forward looking growth indicators.
  • Focus continues to centre on the development in the euro area debt crisis. There are an array of critical events in the coming months, such as ECBs 36 months LTRO, PSI negotiations in Greece, European bank recapitalisation, details/implementation in the wake of the EU Summit and large government bond auctions in Italy and Spain.
  • In the short term the primary tools to fight the crisis will be the ECB and the EFSF possibly combined with further help from the IMF. In the long run can Eurobonds or redemption bonds be part of the solution.

Key events the coming months

Euro area
  • Result of 36 months LTROs.
  • Negotiations on Greek PSI deal.
  • Bank recapitalisation in Europe.
  • Rating move on EU17 and EFSF.
  • EU summit details.
  • Auctions in Italy and Spain.
  • EFSF role in secondary markets.
  • IMF role in debt crisis should be clarified.
  • General election in France.