If you take the “G” out of “PIIGS”
Angela Merkel and Old Nick Sarkozy failed to wow the market with an agreement that would make the market forget about the weak data coming out of the eurozone. The market’s dreams of a Eurobond designed to try to structure all the eurozone debt under one umbrella and force the PIIGS to get in line were dashed and replaced with the uncertain nightmare of a so called financial transaction tax instead and some. Oh Yea that's going to solve it. Of course they also proposed that leaders of the eurozone meet more often for swanky dinners and perhaps try to better coordinate budget and tax policies but failed to mention spending any more cash to help bail out their beleaguered eurozone partners.
To be honest, right now for Angela Merkel to come out and say that she is in favor of Eurobonds is a political impossibility, although I think deep down she would like to try to put this crisis behind them. I think she would like to have the power to reign in PIIGS out of control spending and have some say in the zones future, but she has to do it in a way that is politically palatable to her country. Maybe she would like to get Greece out of the eurozone. Just kicking the G out of PIIGs would leave a still very messy PIIS. Hmm.
Of course, saying that the Eurobonds are a last resort, both she and Sarkozy may be laying the ground work for a Eurobond minus Greece. Yet the markets were looking for more immediate action and not more taxes. The market wants certainty not more questions. The market was disappointed as they hoped for more progress or at least hoped that the inference that perhaps a Eurobond would be in the future.
Holy Fitch! The good news was that Fitch reaffirmed the U.S. AAA credit rating. Fitch says that "The affirmation of the U.S. 'AAA' sovereign rating reflects the fact that the key pillars of U.S.' exceptional credit-worthiness remains intact: Its pivotal role in the global financial system and the flexible, diversified and wealthy economy that provides its revenue base."
Take That S&P! Fitch also said the failure of the Joint Select Committee to reach agreement on at least $1.2 trillion of deficit-reduction measures would likely result in negative rating action. Still, the disappointment in the oil complex from the lack of any clarity from Merkel and Sarkozy was offset by the Fitch News and a very bullish American Petroleum Institute Report.