The markets like stimulus plans. Yesterday saw significant rallies in the stock market after it was announced that Angela Merkel would recapitalize European banks quickly and efficiently. Now we have to wait to see if this happens.
It seems that fears about liquidity shortages within the banks have woken up the German chancellor at last. She stated that attempts to fund the banks privately had been made (does anyone believe that investors would enter right now?). And if not, their nations ought to facilitate stimulus plans (when debt is skyrocketing and spending cuts are at their sharpest?). She concluded that if a particular country cannot face their economic burdens, they could ask for aid from the European recovery fund with certain conditions.
Hallelujah! Merkel authorized printing money, which is what the markets are asking for. Further, the German chancellor and the French minister of finance both know that Greece is going to default again on its loans.
We have made significant steps toward solving the crisis. Doubt still exists around exactly how much is needed now that we have postponed the decision until now. Moody's lowering Italy's credit rating spread considerable uncertainty. The IMF said yesterday that it could purchase debt from Spain and Italy, to later affirm that there was a legal transfer.
Perhaps we should pay some attention to the emerging economies that have been aggravated by Europe's problems? If Greece and Portugal are restructured, the figures would be acceptable. But if Spain or Italy has to receive debt pardons, then the solution would get ugly. For this reason recapitalization has to be accompanied by heavy enough firewalls.
