Germany relented from their hard line stance agreeing with the plan to allow the European Financial Stability Facility (EFSF) to get bailout funds to banks; mainly Spain. Italy’s prime minister Mario Monti (photo left), while claiming to put pressure at the negotiating table of the European Summit, implied Italian banks would not tap into the fund “at this time.”
The essence of the summit was to take the burden of recapitalizing the banks off the sovereigns and transfer it to the rescue funds, said David Tweed, Bloomberg’s Europe editor.
Although not generating a huge reaction in the stock market, the conclusion of the latest European summit had stock futures moving up over one percent.
SMA Comment: This summit agreement doesn’t solve the deep-seated issues involving bad loans, along with the structural problems caused by an entrenched nanny state. Only with sufficient time, in terms of years, will the ultimate resolution be reached. Unimpeded economic forces will allow a final solution to Europe’s woes. The natural progression of default and collapse, followed by social revolution, will set the stage for a resurgence of Europe’s economic stature.