According to US administration sources, Barack Obama has received guarantees from European leaders who met Tuesday at the G-20 that soon, likely at next European Council meeting, Europe will announce a comprehensive plan that is designed to end the euro crisis. Color me sceptical but I’ll believe it when I see it. Nevertheless, senior sources within the US government are saying that measures will include tax unification and stimulus plans to economic growth. According to the sources, US President Obama heard precise details of the plan, which he is supposed to have considered vigorous enough to immediately return calm to markets.
This is what I am hearing via a story out of Spanish daily El Pais. The story goes on to say that the meeting with Obama included Germany, France, Italy and Spain, as well as the United Kingdom and happened on Monday. Obama is reported to have met German Chancellor Angela Merkel on Monday alone as well. Clearly, this is part of the US President’s efforts to influence Europe’s reaction to the ever widening crisis in the European periphery as the fallout of weakening growth in the US takes its toll on the President’s poll numbers.
As I indicated in the last post on Italy’s delay in passing the ESM facility into action, the reality is that the ECB is really the only European organization that has the firepower to deal in a definitive way with the euro crisis. It has to be noted that Italy’s bailing out Spain via the ESM is laughable considering Italy’s 120% government debt to GDP compared to Spain’s 72% and Germany’s 82%, all figures well above the Maastricht 60% hurdle. So while El Pais has touted this as a potential silver bullet, unless we see specific ECB action here, it is not.