90 seconds at 9 am: Euro summit

90 seconds at 9 am: European summit faces indecision on fiscal union, banking union and disputes over Greece; Bernanke denies QE Infinity unleashing damaging capital flows

15th Oct 12, 9:03am by Bernard Hickey

Here's my summary of the key news over the weekend and in the week ahead in 90 seconds at 9 am, including news financial markets will be watching European leaders at a key summit later this week for signs they can agree on longer term solutions for the European debt crisis.

Leaders meet in Brussels on Thursday to discuss proposals for a Euro-zone fiscal union, a Euro-zone banking union and proposals to give Greece more time to meet its austerity targets. See more here at Bloomberg.

However, disputes and indecision continue to dog the 17 nation Euro-zone. German Finance Minister Wolfgang Schauble reassured investors that Greece would not be allowed to exit the Euro-zone, but Sweden's finance minister said a Greek exit within 6 months was possible.

Doubts also remain over whether and when Spain may ask for a formal bailout, which would trigger the European Central Bank's plan for unlimited bond buying, also seen as the 'Big Bazooka'.

Meanwhile, US Federal Reserve Chairman Ben Bernanke spoke over the weekend in defence of his Quantitative Easing plan known as 'QE Infinity'.

Bernanke denied it was unleashing damaging capital flows that were pushing up currencies in smaller, more open emerging and developed economies such as Brazil, South Africa, Australia and New Zealand.

He said the net costs were not yet clear.

Bernanke's comments contrast with those of the IMF's Christine Lagarde, who warned money printing in countries like America, Britain and Japan was unleashing capital flows that were inflating currencies in emerging markets, damaging their economies.

See more here at Reuters.

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13 Comments

by Andy Rodgers | 15th Oct 12, 9:45am 1350247514

Over the last 2 years there have been 21 Euro Summits, somehow I don't think the 22nd will achieve much more than the previous 21.

by Gareth Vaughan | 15th Oct 12, 11:35am 1350254118

But, but they've got a Nobel Prize now! And what a sick joke that must be for the people of Greece and Spain...

by Christov | 15th Oct 12, 12:30pm 1350257411

I'm not Spanish or Greek Gareth, but I found it an affront to intelligence, not to mention the smug smack in your face of elitism.......are you sitting down for this one peasant..?

by Gareth Vaughan | 15th Oct 12, 12:41pm 1350258075

Agree. Seems like the judges are living on another planet.

by Christov | 15th Oct 12, 12:59pm 1350259184

Pluto maybe Gareth, they were unanimous in their plutonomy.....sending a signal to Uranus and respective inhabitants thereof.

by Gummy Bear Hero | 15th Oct 12, 10:06am 1350248793

...... sorry Bernard , it's not that we're ignoring you ..... it's just that , when you go to a dance , everyone wants the hand of the prettiest girl , and as it happens , Gareth Morgan is on site ! ...

We'll get back to you later ..... it wouldn't hurt to do yourself up a little in the meanwhile .... rather scrofulous look this morning ... tch tch ... borrow Amanda's lip-gloss !

by Christov | 15th Oct 12, 10:33am 1350250434

Infinity was your tag Bernard........

So O'K lets have a lookie see

Restating a theme that he has addressed in the past, the Fed chief also said that if emerging economies stopped intervening and allowed their currencies to rise, this would help insulate their financial systems from external pressure. Well I think that clears up what Bolly learned in Jackson Hole and who determined best practice for the RBA and RBNZ....whew ..!,glad that's clear now. "Under a flexible exchange-rate regime, a fully independent monetary policy, together with fiscal policy as needed, would be available to help counteract any adverse effects of currency appreciation on growth," Bernanke said. Now I think we learned what Bolly didn't tell Bernake in Jackson Hole, in that he sort of got part two of that statement but didn't have enogh grasp on macroeconomics to implement it, so would pick up the doughnut and hopefully follow the RBA when the time came. In opening remarks at the conference that Bernanke addressed on Sunday, IMF chief Christine Lagarde said aggressive steps by the Fed, the European Central Bank and the Bank of Japan were "big policy actions in the right direction." Christine not so much contrast there Bernard ..? did you actually read it, or just skim over it for a byline...? But she took note of the distress those policies were causing elsewhere and called for central banks to step-up their dialogue and cooperation. Central banks to step up the dialogue and co-operation...? did she mean us or them..?, you see , Bolly cannot dialogue what he doesn't understand, without looking like he doesn't understand it. It's a bit like not wanting to ask a question when it appears everyone else gets it...when they didn't get it either, and hoped to pick it up along the way....no I'm not kidding..! at this level of financial importance, could that be...? Yes it could be and on reflection probably was. "Accommodative monetary policies in many advanced economies are likely to entail large and volatile capital flows to emerging economies," she said. "This could ... lead to (economic) overheating, asset price bubbles and the buildup of financial imbalances." Really Christine ...? do tell, anything like that happening round this neck o the woods...um...er... well gee, what was part two of Bernanke's statement again ....? No wonder we were all scratching our heads at Bolly's wait n see policies over the years. he was waiting and seeing whether the RBA GOV. got it.... and by the look of their little bubble problem, they been waiting on someone else. Of course Bernard I do appreciate knobbling China was always part of the strategy. Brazil accuses the U.S. of being selfish..?..well forgive me for saying so , but if there was ever a time for the U.S. to be selfish ...it's now, they are in deep doo doo. What's good for the U.S. is good for the Global economy in the long term. Probably right about that except the U.S. dollar economy has outgrown the needs of it's host.

by Christov | 15th Oct 12, 10:39am 1350250787

Gees Big B...why can't you just edit my dyslexia and so forth at your end....? oh, right silly me..duh , you'd have to read it first.

Dyslexia Rules KO. .....although, I've not done teh yet.....makes you tihnk dot'n it.

by powerdownkiwi | 15th Oct 12, 10:59am 1350251987

flesmih melborp ralimis a morf sreffus eh ebyam

by Gareth Vaughan | 15th Oct 12, 11:11am 1350252662

Come on GBH, family show here...

by Gummy Bear Hero | 15th Oct 12, 2:58pm 1350266280

Sorry Gareth .... ummmm , just testing to see if you were wide awake on Monday morning .... yup , that's it .....

..... well done !

by Christov | 15th Oct 12, 12:24pm 1350257092

Maybe he does at that PDK...but you'd only think it easier on the eye in that csae.

by starfish1 | 15th Oct 12, 1:24pm 1350260644

If I was Greek the best thing that Greece can do is get out the Euro as quickly as possible. If they had done this 5 years ago Greece could be on the road to recovery by now. Instead Greece will have Debt lots of debt for as the eye can see in 100 years time. The best thing for Greece is to come out of the Euro , get there currency back and become cheap for holiday/tourism and manufacturing. They can default on all their loans and not have to pay anything back. If Greece stays tied to the Euro they are stuffed.

Similarly in Italy, the former Berlusconi party would make a lot of money if Italy was to come out of the Euro Zone. They maybe secretly plotting something!. Additionally the Euro Summitts are impossible to get anywhere since each country has its own interest at heat so agreeing on anything will take too long to achieve anything. Additionally nobody knows what they are doing, so it is truely a 22nd muppet convention. I would expect to see a completely different Eurozone in 5 years time as to how it is today.