German Chancellor Angela Merkel, French President Nicholas Sarkozy and new Italian Prime Minister Mario Monti took part in their first three-way talks today in Strasbourg. The trio met to discuss the future of the euro. During a news conference they all stood in a neat little row in front of matching podiums making it quite clear that they form a united front. This represents a change for the Italians as their former PM, the proudly misogynistic billionaire Silvio Berlusconi, was at times vocal about his distain for the common currency. But what to take away? Merkel and Sarkozy appeared to agree that Monti would do the right thing for Italy while Sarkozy stated that they would not get in the way of the European Central Bank, “We all stated our confidence in the ECB and its leaders and stated that in respect of the independence of this essential institution we must refrain from making positive or negative demands of it.” This has the ring of, hang together or hang separately. Germany and France now have Italy to depend on thanks to their newfound friendship with Monti; as BNN.ca points out it will be sink or swim depending on how the Italian fiscal situation unfolds, “Keeping Italy solvent and able to borrow on capital markets is vital to the sustainability of the euro zone. Key Italian bond auctions early next week will test market confidence.” Hopefully they will go better than the German Bond sale that fell 35% short of the mark (no pun intended). Today’s meeting was intended to showcase a new found stability — however according to reports “the euro fell from $1.338 against the dollar at the start of the leaders’ press conference to a low of $1.332 and European stock markets fell back from earlier gains.” The Bank of Canada looks like they see through the façade. As Governor Mark Carney, also the new head of the G20’s regulatory Financial Stability Board, appeared to anticipate the situation when he said during a speech in Montreal yesterday, “European authorities have announced important plans to provide time to refound their monetary union, but acute strains persist. At this point, the crisis appears barely contained.” Furthermore the Bank of Canada will reportedly keep its key interest rate at its current 1%. What is required is calm leadership, a sense of direction and purpose rather than politics. The need for deeds not words. As I am reminded of a line from the movie The Gathering Storm, Winston Churchill, as played by Albert Finney, says to the house “if we fail to act now, history will cast its verdict with those terrible, chilling words, TOO LATE!” | Raymond Matt, CFP, CLU, TEP, CHS
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