Bad News from the EU Meeting

While Euro zone leaders have agreed on how to resolve debt crises from 2013, they have failed to address the immediate debt problems. The leaders have agreed on a change to the EU treaty to create the European Stability Mechanism (ESM) which will be implemented in 2013 to help countries with liquidity problems and allow for debt restructuring of insolvent ones (The Globe and Mail).

However, the leaders have failed to agree on how to deal with the immediate refinancing crises faced by many European nations such as the PIIGS nations. The market is doubtful whether the European Financial Stability Facility (EFSF) will be sufficient in the meantime (until 2013) to rescue countries from future refinancing problems. The size of EFSF is currently standing at around 440 billion Euros, and the market does not believe that it is sufficient.

For more details on the European debt problem, please refer to my previous blog posting ‘It’s Complicated..’ and 'Brace for Yourself, We Have a Bigger Problem Ahead in 2011.'