Germany and the U.K. have a lot of "common ground" and goals for the E.U. says German chancellor, Angela Merkel adding that to reach these goals, some countries will have to do their "homework."» Read More
In Jackson Hole Wyoming on Saturday Jean-Claude Trichet, the president of the European Central Bank was due to give a speech to a meeting of policy makers hosted by the Federal Reserve. As he prepared to speak the euro zone faced huge problems.
Following weeks of heavy losses for banking stocks across Europe, the Sunday Times in the UK reported Sunday that European officials are working on a "radical plan" to prevent a fresh pan-European credit crunch.
"It reminds [Bernanke's speech] me of the movie airplane in the scene where one of the gates agents is saying 'don't panic don't panic' where all the passengers are running towards the exits. I think his primary job as Fed chief is just to be calm and to try and reassure markets. The story is kinda wearing thin, the vaudeville act, no-one's really buying it," Andrew Schiff, investment consultant at Euro Pacific Capital told CNBC. "The markets were expecting some kind of QE3 announcement today, they didn't get it but what they did get....was the extended meeting of the Fed in September and maybe they will get some grand QE3 strategy announcement in September."
Forbes Magazine might have just put German Chancellor Angela Merkel on the throne for the "Most Powerful Woman" in the world, but at home her less exulted throne of government is shaking.
Germany is playing a cat and mouse game with less successful European economies as negotiations over the euro zone crisis continue at the country level, Giles Keating, head of research at Credit Suisse, told CNBC Friday.
The world could be heading into another fully fledged credit crisis, according to Satyait Das, the author of Extreme Money: Masters of the Universe and the Cult of Risk.
In any murder mystery film, it pays to watch the boring gray man (or woman) in the corner; quiet, unobtrusive characters can be deadly. So, too, in finance. Four years ago, the giant US money market funds seemed some of the dullest actors in the global financial scene. But in 2007, they quietly helped to spark the crisis in the mortgage-backed securities world.
Chris Wheeler, bank analyst at Mediobanca joined CNBC to discuss the latest news on the European markets and what would happen if the Greek bailout fails.
"Greece has most definitely been cut loose by the markets, the question is whether it will now be cut loose by the politicians," Steve Barrow, head of G10 research at Standard Bank, told CNBC.
Barclays is comfortable with its exposure to Europe and now has more cash on its balance sheet than before the 2008 financial crisis, CEO Robert Diamond told CNBC Wednesday.
Banks are in no better shape than they were in March 2008, Riccardo Ronco, technical analyst at Aviate Global, told CNBC. He suggested they still faced severe funding problems and that "things will get worse before they get better".
"True European fiscal union is something we will probably not see for another ten or twenty years," Alan Capper, head of credit strategy at Lloyds Banking Group told CNBC. He added that some countries within Europe were dealing with "generation long" economic problems and that some members of the Euro zone would have to get used to a long period of low or no growth and markets should price for the risk accordingly.
The idea that Paulson needed a crisis in order to solve a bigger crisis could be seen by some as a post-game rationalization by the former official, but it raises some interesting questions for German Chancellor Angela Merkel and Europe's ongoing sovereign debt crisis.
"In terms of global competitiveness what you see is the US has gained leaps and bounds versus Europe. Now, clearly emerging markets are still very competitive on an absolute cost and wage basis, they are still the leaders. However, once you add logistic costs and other associated costs the US is still very competitive at this point," Virginie Maisonneuve, head of multi-regional equities at Schroders. "You are seeing companies like Volkswagen going into places like Tennessee and getting cost on an hourly basis of $17 to $18 an hour, remember the likes of GM were firing at a cost of around $90 an hour so very much competitive."
Simon Maughan, head of sales & distribution at MF Global joined CNBC to discuss the German economic figures and market reaction. He added the expected the European Central Bank would be forced into some form of quantitative easing to support the Euro.
On July 21, EU leaders agreed to a second bailout for Greece, one that was supposed to draw a line under the euro zone debt crisis and give the new government in Athens a chance come to grips with the huge debts it inherited when it was elected. One month later, and the situation appears to be getting worse rather than better, according to Simon Derrick, the head of currency research at Bank of New York Mellon.
"I think the German PMI announcement will have an impact on spread widening, because investors will see it as an indication that the world is slowing, Germany is slowing, and in general, risk is increasing," Adrian Schmidt, FX strategist at Lloyds Bank Corporate Markets, told CNBC.
Predictablity on the global political stage is failing to allay market uncertainty, says Vince Farrell.
Insight on how the euro can find stability again, with Frank Engels, Barclays Capital co-head European economics.
European leaders are being pushed into closer fiscal union sooner than they had anticipated by volatile markets concerned over a dearth of ideas on how to solve the sovereign debt crisis in the euro zone, analysts and investors told CNBC.