Europe will have a defining opportunity during the month of September. Three years’ worth of cross-fighting over the right solutions to the sovereign debt crisis will come to a head during the first 15 days of the month.
This Website Is For Financial Professionals Only
September 12 is the date when the German government decides if the European Stability Mechanism (ESM), a permanent mechanism for providing economic assistance to Eurozone member countries, is constitutional.
It is also the date of a Dutch election on whether insolvent countries should be allowed to leave the euro. On September 14 and 15, European finance ministers will meet in Cyprus.
One of the critical dates before then is September 6 when European Central Bank (ECB) president Mario Draghi assembles the Governing Council
to discuss the pronouncement he made on August 2 that the ECB stands ready to assist distressed countries in whatever way is necessary.
Draghi is in contention with Germany’s Bundesbank, trying to convince it that preserving the euro is in Germany’s best interest and, therefore, Germany should give its backing to using monetary stimulus to ease conditions for distressed Eurozone members.
Draghi insists that a new structure for the euro
which supports sustainability for all Eurozone member countries does not mean there also must first be political unity. He says that economic and political integration can occur simultaneously.
He also says that Eurozone countries can strengthen oversight of the various national budgets gradually over time instead of in the all-or-none approach long favored by the Bundesbank.
So, the month of September holds quite a few cards that could significantly impact the global economy. The US Fed meets just before the European finance ministers' meeting.
Whether the Fed takes stimulative action will be the anticipation in the US and whether Europe can come together to agree on a more permanent solution, specifically the ESM, will be the anticipation across the globe.