The Italian Prime minister Mario Monti wore down the German political contingent much like the Italian football team did in last night’s Euro 2012 semi-final. Monti argued his point for over 13 hours during heated talks refusing to end the meeting unless his and Spanish Prime Minister Mariano Rajoy’s terms were heard.
Finally in the early hours of the morning the European leaders emerged bleary eyed and exhausted revealing that a plan to halt the single currency’s slide had been agreed upon. The leaders have agreed to set up a joint banking supervisory body for the Eurozones banks and vitally to the Spanish and Italians promises were made to reduce the cost of borrowing for the two nations. The deal also attempts to sort out a problem with a previous agreement to lend money to Spain’s banks. There had been confusion over where that money would come from, and which lenders would have priority in the event of a default.
The new agreement makes it clear that the EU’s existing bailout fund – the EFSF – will provide aid under the current rules until the new fund, the European Stability Mechanism (ESM), begins operations. The ESM is due to be launched next month.
The meeting was said to have been bad tempered and dramatic as it rolled on through the night with the Italians and Spanish blocking any progress on any deals until their demands were met and they received guarantees that the Eurozone would make moves to cut their borrowing costs. Both nations were suffering heavy interest rates at the 7% level. The negotiations were in a stalemate for hours as the leaders bickered prompting the departure of the 10 non-euro member delegates to leave the summit.
When the epic talks had ended it was the early hours of this morning and finally a three point decisive plan was revealed. The proposed plan would rewrite the rules for the Eurozone‘s bailout scheme, which is likely to ease some pressure off of Greece, Portugal and Ireland. They also agreed that the measures would be put into force by the 9th of July.
As a result of the deal agreement the Euro surged to an eight month high against a basket of currencies taking many investors by surprise. The news sent the US Dollar tumbling against a number of other currencies as the demand for safe havens was curtailed and the Euro became more appealing to traders.
Market analysts are remaining cautious as we have seen similar promises made before. Some are taking a wait and see approach but either way last night’s meeting proves that some of the EU leaders do have the grit needed to stand up to the Germans.
The Pound to Euro exchange rate is currently trading at 1.237
The Pound to US Dollar exchange rate is currently trading at 1.568
The Euro to Australian Dollar exchange rate is currently trading at 1.238
The Euro to US Dollar exchange rate is currently trading at 1.267
The Euro to Pound exchange rate is currently trading at 0.807
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