The euro weakened, stocks in Europe and the U.S. have weakened Wednesday, on several headlines indicating that the EU may not set the size of the EFSF capacity tonight, that a final agreement may not occur until the end of November.
We broke decisively lower as we passed yesterday's low on the S&P 500 (1226), known technically as an outside reversal.
There's also uncertainty about the writedown of Greek debt.
German Chancellor Angela Merkel says she wants lenders to take a 50 percent haircut. The Institute for International Finance (IIF), which is negotiating with the EU on the size of the Greek haircut, says they have put "a significant new offer" on the table, but won't elaborate on what it is.
Now, can I tell what I really think? Juergen Stark, the top German official at the ECB, who resigned in September but still has not left the ECB, noted in an interview that he is not sure if the worst of the crisis is behind us and that the "central bank cannot save any country."
Mr. Juergen also said he would speak more directly about about the crisis after leaving the ECB. That's helpful.
Mr. Juergen will remain on the ECB until his successor is appointed, which may be by the end of the year.
The German Bundestag's very strong endorsement of EFSF expansion (503 votes for, 89 against, 4 abstentions) comes with a price: the motion says that the EFSF cannot be financed by the ECB. This is a direct shot at the French plan that suggested turning the EFSF into a bank, with the backing of the ECB. The motion also says that the ECB will no longer need to buy sovereign bonds in the secondary market.
Will the ECB follow this advice? Theoretically, they are independent. Incoming ECB President Mario Draghi this morning said he would be willing to continuing buying bonds.
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