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« Does Gold’s Correlation with Stocks Mean that it’s No Longer a Safe Haven? | Main | Dummies' guide to what went wrong in banking »

Angela Merkel vows to create a 'fiscal union'

Angela Merkel

We are losing the will to live!!! This is talk, talk, talk, meeting after meeting, more blather, when its actually game over for these inept political twits, all they need is somewhere to go and hide.

Angela Merkel has vowed to create a "fiscal union" and signalled an uncompromising push for treaty changes at the crucial European Union summit next week.

The German Chancellor made it clear that eurozone states would be called upon to relinquish economic sovereignty and be subjected to close central supervision – a pre-requisite for the eurozone to secure vital extra financial help.

"We are going to Brussels with the goal of achieving treaty change," she said. European leaders have promised four "comprehensive" but unsuccessful rescue packages in 19 months, but traders ignored continued signs of stress in bond markets and banks and bet Mrs Merkel would finally deliver.

The Euro Stoxx rose 1.24pc with similar rises on exchanges in Germany, France, Italy and Spain.

The surge was also fuelled by signs that the European Central Bank was considering ways to by-pass its own rules that ban it from lending to individual countries.

Sources said that Mario Draghi, boss of the ECB, had given the go-ahead to explore ways for the Bank to lend to the International Monetary Fund (IMF) which could then in turn extend credit lines to Italy and Spain.

The plans are thought to be embryonic and are unlikely to win support from Germany but were still taken as a positive sign that the ECB is willing to consider radical measures to shore-up the euro. Mr Draghi has already suggested that the ECB is prepared to launch another big bond buying spree – if the eurozone countries agree to a fiscal union.

Experts warned that ECB and, or IMF measures were becoming increasingly necessary. Borrowing by eurozone banks from the ECB jumped to €8.64bn (£7.4bn) on Thursday – the highest levels since March – and a clear sign of intense stress.

Mrs Merkel said solving the crisis was a "marathon" that could take "years". She told the Bundestag that it was "absurd" to claim that Germany was trying to "dominate" Europe but was insistent that "fiscal union" did not mean bowing to other demands. She said any "discussion about euro bonds is pointless" and warned that she "will not comment" further on expanding the role of the ECB. "The role of the ECB is different from that of the Fed in the US and the Bank of England," she insisted.

Even so traders bet that the three-day stock market momentum – triggered on Wednesday by the US Federal Reserve's pledge to inject liquidity into the system – would continue into next week.

Mrs Merkel confirmed she would travel to Paris on Monday for pre-summit talks with Nicolas Sarkozy.

Any concrete agreement between the leaders would underpin confidence. The vital week will also see new Italian leader Mario Monti unveil tough new austerity measures and a decision from the ECB on interest rates.

One trader said: "It's a very big week and one that could finally see some resolutions. Markets have already rallied sharply – no-one wants to miss out on what could now follow." PORTUGAL has raided €5.6bn (£4.8bn) of pension fund assets in a controversial scramble to meet its deficit targets.

The cabinet agreed to transfer the assets from four of Portugal's biggest banks to the state balance sheet. The assets will be used to bridge a gap needed to meet the fiscal deficit target of 5.9pc of GDP set by the terms of the country's €78bn bail-out. Portugal said it had informed the EU and IMF and assured them it would be a "one-off" move. However the 2010 budget was met by shifting three pension plans from Portugal Telecom onto the public social security system. The liabilities don't count, yet.

There have been no complaints from Eurostat but Raoul Ruperal from Open Europe said: "This can't be seen as a future revenue stream in any way."


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