No news like EZ good news

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The AFR is reporting this morning that a European bailout is a done deal:

European leaders are poised to announce a €750 billion deal to bail out Spain and Italy, The Telegraph has reported from the G20 summit in Los Cabos, Mexico.

The Guardian has reported that German Chancellor Angela Merkel is poised to allow the euro zone’s bailout funds to buy up the bonds of crisis hit governments, a move the cornerstone European economy has previously rejected.

Two rescue funds are to be used to buy the debts of the troubled economies, the cost of which have reached record highs in recent weeks.

It is hoped that the move, which represents a substantial shift in policy for Merkel, will send a strong signal to financial markets that Europe’s biggest economy is finally prepared to back its weaker neighbours.

Let’s hope it’s true. But The Guardian report upon which this hope is based added a key proviso:

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A spokeswoman for Merkel said: “Nothing has been decided yet.”

Delusional Economics will have more later.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.