The euro-currency dropped below $1.30 for the first time since Jan. 12 reinforcing market fears that last week’s summit of EU leaders has not gone far enough to fix the currency. The euro touched as low as $1.2994
The euro has managed to hold its own during the debt crisis, only dipping slightly when faced which each new emergency. Despite rising concerns over the level of government debt in a number of countries, actions by the ECB and the EU seemed to keep the euro safe. The agreement last week to get the economies of the euro-zone countries more aligned has met with skepticism in the markets. For the week prior to the summit, investors and politicians were warning EU leaders Sarkozy and Merkel that they were running out of time. They needed to present a roadmap for pulling Europe out of the grips of depression; instead, the only dealt with long term solutions to prevent a crisis from happening in the future.
Their long term “fiscal pact” will take months to be approved by the 17 euro nations regardless of the other 10 nations of the EU. This pact was not even a final draft but a proposal and set of rules and regulation. Already many of the nations are having problems within their own country getting these new rules accepted.
Chancellor Merkel, yesterday, stood firm and would not budge on the amount of funds to be raised by the EFSF, keeping it much lower than the amount the markets need to be assured of keeping the troubled EU countries from defaulting.
The IMF is also running into problems with the rules and regulations of how they accept funds and loan funds. Many of the countries that are willing to add to their deposits with the IMF want assurances on how the money will be used. The general account where the money is held, cannot be specified for specific countries and the funds would be available as the IMF deems fit, along with the US who has veto power over all loans.
Investor’s nerves are rubbed raw; they are running for high ground, assured that Europe will remain in a recession until 2013; most investors are pulling money away from Europe and businesses that depend on Europe for their revenue.
European banks have been promised liquidity by the ECB, but there is a limit to the funds and the assistance that the ECB can provide.
Time has run out and Merkel and Sarkozy just do not seem to be aware of.