Global markets received a shock today following comments by a highly-placed German official that seemed to run counter to the growing optimism for the upcoming European summit. The meeting, which is scheduled for October 23rd, is expected to produce the final version of the debt relief plan hashed out over the past few months. The plans also likely made up much of the agenda of the G20 Finance Ministers meeting held in Pairs over the weekend.
Steffen Seibert Ã¢â‚¬â€œ spokesperson for German Chancellor Angela Merkel Ã¢â‚¬â€œ said at a meeting in Berlin on Monday that Ã¢â‚¬Å“dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday wonÃ¢â‚¬â„¢t be able to be fulfilledÃ¢â‚¬Â.
Ouch. So much for daring to dream.
Following SeibertÃ¢â‚¬â„¢s comments, the euro fell from a one-month high against the dollar declining by more than a cent to $1.3766 during mid-morning trading in New York today. Market sentiment also moved away from the euro with less than 40 percent of traders holding long positions in the EUR / USD currency pair by 11:00 am Monday morning.
European banks also spoke out against rumors that they could be forced to take a 50 percent loss on Greek debt. While the idea that Greek debt holders would face some degree of Ã¢â‚¬Å“haricutÃ¢â‚¬Â has long been considered part of an eventual bailout, the banks claim they earlier agreed to cuts of 21 percent; their position is that losing half of their holdings could force them into hardship.
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