Obama joins French President Hollande to back growth

While welcoming G8 leaders at Camp Davis on Friday, President Obama has hoped that the world leaders would find a solution to eurozone crisis that would be a pragmatic mix of “fiscal consolidation” and “strong growth agenda”. He also stressed upon the importance of Europe and its strong hold on American economy and the need to put Europe back on the growth path. With Europe already bracing for possible Greek exit, Obama’s take on “growth” is expected to divide the house into two and set the ball rolling for more heated debates.

It seems that French President Francois Hollande’s pro-growth policies have found an echo in his American counterpart, Barack Obama. In aligning with growth, Obama is believed to have distanced himself from Angela Merkel-backed austerity program.

Obama’s view reflects the growing fear of eurozone financial crisis and its cascading effects on other parts of the world. This has the potential to hurt the slowly recovering US economy also Obama’s re-election chance. It is believed that  the four day Camp David summit would be the ultimate testing ground for international diplomats not only to iron out their differences, but also to find a viable solution to euro zone crisis that has threatened to plague the entire financial world.

Is Europe NOT in sync with EU treaty change?

Despite repeated assurance from Angela Markel, German chancellor, tension over change in EU deal is brewing up in euro zone. So far, Markel has succeeded in securing agreement from 26 member EU nations. But there are still four nations who have to give their consent to the deal. They have taken time to reconsider the wider implications of the treaty change vis-à-vis their respective countries. Governments of the four states that include Hungary, Denmark, the Czech Republic and Finland are currently going over the details of the treaty with their parliaments before making their decision final. Britain has already withdrawn from the proposed EU pact.

Markets on Wednesday have reacted negatively despite Europe’s brave claim to present ‘fiscal union.’ For the first time since January this year, Wednesday saw Euro hit a record low, below $1.30. This has further spiked up the rate of Italian government bonds, which would mean further increase in borrowing cost for the Italian government already spiraling under debt crisis.

The European Central Bank is facing increased pressure from euro zone nations, reeling under debt crisis, to step in and buy their sovereign bonds. But the head of the central bank of Germany, Jens Weidmann, has rebuffed their attempts to misuse European Central Bank’s fund in this way. Weidmann further stated that instead of looking up to European Central Bank for help, nations should step up reform measures to address their fiscal deficit.

Angela Merkel is optimistic that the new Euro deal would be ready by March. But what the world really wants to know is whether the new deal has what it takes to address the financial crisis of euro zone? Secondly, even if Europe manages to come out of the crisis, will it ever be the same again?

Germany and Poland bury their past hatchets to save Eurozone

Mission to save Euro and Eurozone from the ongoing financial crisis has brought together a never-before coalition between Germany and Poland – known enemies whose past are fraught with animosity and war. As the leaders of other EU countries are struggling to reach a common consensus to tackle European debt crisis, leaders of the two countries have taken a united stand.

In a rare gesture, the Prime Minister of Poland, Donald Tusk, has given its full backing to German Chancellor Angela Merkel in her attempt to ask for full change in the treaty. Full and fundamental change in the European treaty is necessary to bring in severe budget cuts and centralized monitoring.

As an ally, Poland brings on the table several brownie points for Germany. Poland enjoys close relationships with countries that belonged to former Soviet Union and countries of northern Europe. Poland is also an enthusiastic supporter of unified Europe and hopes to join Euro in the future. Besides, the commanding position that Poland enjoys among nations outside eurozone also goes well with Germany.

The final clincher was the foreign minister of Poland, Radoslaw Sikorski’s recent comment that set the government and foreign policy departments of Berlin abuzz. “I fear German power less than I am beginning to fear German inactivity.” Radoslaw Sikorski also did not forget to hail Germany as indispensable to Europe.

European debt crisis threat as Italian Bonds touches new high

The fear of European debt crisis became more pronouned on Wednesday as Italian government bond spiked to a new high of 7 percent plus. Italian market tumbled in the afternoon as bonds breached the important threshold of 7 percent, triggered by the fear that EU has no rescue plan for Italy. This had a spiraling effect on other world markets, including Asian markets on early Thursday.

Italy, a core Euro zone member and the 8th largest world economy, is the world’s third largest bond market. Its debt amounts to a huge 2.6 trillion Euros – considered too much to be absorbed by EU.

German chancellor, Angela Merkel, warned that unless concrete and quick structural reforms take place to cut cost, it could result in collapse of the Euro currency. Angela Merkel has also demanded changes in the EU treaties.

The European Central Bank has bought, until recently, large chunks of Italian bonds to cut back its borrowing cost. But it is unlikely that the bank will be willing to buy any more after the new high.

As the resignation of Italian Prime Minister, Silvio Berlusconi, is still a month away, investors confidence has gone southward. Experts feel that Wednesday’s market reaction is not because of its poor fundamentals but because of fear of instability triggered by lack of decisive action on the part of Italian Premier.