Crisis Worsens Ahead Of Meeting

EuroIntelligence report sovereign and banking crisis worsens ahead of meeting: Steinmeier and Steinbrück break ranks with Merkel, and accept the principle of eurozone bonds; favour a three-step solution: haircuts for Greece, Ireland and Portugal, ringfencing of Spain and others, and the introduction of eurozone bonds, up to some ceiling of GNP; shift in position undermines government’s claim that eurozone would never find majority in Bundestag; Asselborn says Merkel’s behaviour had been “theatrical”, and accuses Germany and France of arrogance; the crisis yesterday spread further to Spain, as bond yields reached new eurozone records; the good news from Spain are data showing a reduced reliance on ECB funding; S&P put Belgium on a downgrade watch because of a lack of government; Germany accepts the principle of an ECB capital increase; Wolfgang Münchau, meanwhile, compares the political response to the crisis to Hans Christian Andersen’s Emperor.

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