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Reply #12: Brussels deal fails to end uncertainty over spreading crisis [View All]

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xchrom Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Dec-09-11 07:38 AM
Response to Reply #5
12. Brussels deal fails to end uncertainty over spreading crisis

The tentative response from the financial markets speaks volumes. Nobody is really sure whether the deal thrashed out overnight in Brussels is really the big breakthrough hoped for in advance of the summit. It doesn't look like it, at least not yet. But the talking goes on.

Three things we do know.

The first is that the European Union, probably through their central banks, will provide money for the International Monetary Fund so that the IMF can lend it back to the vulnerable parts of the eurozone. This won't be official, because money for the IMF is supposed to go into a general pot and be available to any country, but in reality up to 200bn (170bn) will head across the Atlantic and back again.

The hope is that this will boost the fire power of Europe's bailout fund, giving it the capability to fend off attacks on Italy and Spain, where bond yields were worryingly rising this morning. It has become quite clear in recent months that the European Financial Stability Facility is insufficiently funded to deal with the spreading sovereign debt crisis and support from the IMF will help. Even so, it may not be enough.
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