The FT is headlining on this agreement though exact details were leaked only to AFP and are yet to hit the global press. The german and french press offers a variety of other insights.
Le parisien and AFP cites french sources in confirming a deal was reached on a 110 bn EUR package. 50 bn tax on banks. Exchange of bonds to reduce debt by 90 bn. IMF lending of 71 bn was mentioned.
The Handelsblatt says that Trichet showed up (unexpectedly) after 4 hours of negotiation at 22h. They finished at midnight. Van Rompuy was then phoned to give the common franco german position so that he could work the Brussel’s circuit. The sueddeutsche goes a step farther stating that it was a franco, german, ECB agreement.
Germany wanted a solution with buy in from Trichet given his and the french sceptical position regarding a private participation of banks and insurance. Merkel did not believe in a voluntary participation, in the previous weeks.
Smaghi in Die Welt had already warned of any credit event given its impact on the Greek banking system, a repeat of a long standing ecb position.
The Greek PM will meet Merkel tomorrow at 12pm CET. The EU/IMF meeting starts at 13pm CET. Top european bank managers will also be at the Brussel meeting (Bild, die Welt) to approve their participation in the solution. The stage is set for a grand deal to satisfy anyone’s taste of a very expensive drama. Sarkozy and Merkel will be flying in to Brussels together.
EURUSD should break higher past Moving Averages at 1.43 as euro swap yields move higher and peripheral spreads tighten, equities rally, usd under pressure as flows continue into EM and risky assets. The recent fund survey showed investors underweight european equities and low on risk. There is still one main risk with the US debt negotiations but it seems that is proceeding if the gang of 6 deal has any substance to it.
Sources: Handelsblatt, Spiegel (pretty much the same as the Handelsblatt). The FAZ develops a fair bit on the attitude of Merkel vs the EU but does not cover the sarko merkel summit yet. The FT Deutschland shows the degree of stress in Berlin that no accord would be reached ahead of the franco german summit, but does not yet cover the outcome (published at 23:13 CET). Bild. Die Welt.
AFP and Le Parisien. Les echos prefers to headline on the philly Fed saying they were preparing for an eventual default of the US. Plosser said they had been working on this risk with the treasury for the past few months. The Fed would as usual be the lender of last resort. He also thinks the Fed should tighten rates by the end of the year. Fiscal vs monetary policy fighting on a different field (US, EU and US vs China).
HSBC Global Research