Eurobond Talk: Good News and Bad News
US stocks rallied off their midday lows as the leaders of Italy and France (Mr. Monti and Mr. Hollande, respectively) said they favor eurobonds as a "possible solution" to the funding needs for the pro-growth strategy they are both promoting.
They both agreed on the need for decisions by the "official" EU meeting in June.
This is good and bad news.
Good news, because it implies there might be a "path" that can be started by June that would lead to eurobonds, down the road. Way down the road.
Bad news, because the most pressing issue today is recapitalization of the European banking system. They need to make a statement on what they want to do on this tonight. Preferred means is to use the European bailout fund to directly recapitalize the banks, not go through the sovereign governments. But once again, the Germans are opposed to this. They want the sovereign countries to control the recapitalization process to keep pressure on the banks to improve their capital positions.
Notice the political posturing: The Spanish and French meet ahead of the EU dinner tonight. The Italians and the French meet. Who isn't meeting ahead of the dinner? Angela Merkel. Lonely dinner.
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