Eurozone

Latest On The European Fiscal Adventureland Ride

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melodramaLike a bad mini-series, the European non-events events just keep rolling on in. Here are the latest ones.

From the Financial Times, leaders failed to create a new treaty.

Leaders of the European Union’s 27 countries failed to agree to change the EU’s treaties in order to implement tighter fiscal rules and instead chose to create a new intergovernmental treaty which will likely have less teeth and be negotiated only among 23 of the bloc’s members.

Despite the division – which will leave Britain and Hungary out of the new pact, with the Czech Republic and Sweden still weighing participation – Mario Draghi, the European Central Bank president, signalled his approval, a key vote of confidence that could allow the ECB to move more aggressively in eurozone bond markets.

The U.K. was a major veto and the reason for the failure. Reuters:

"This is a summit that will go down in history," said Sarkozy. "We would have preferred a reform of the treaties among 27. That wasn't possible given the position of our British friends. And so it will be through an intergovernmental treaty of 17, but open to others."

Central Banks Make Swappin' Out Your Euro Cheaper

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The headlines proclaim the DOW is up 400 points! Yippie, hurrah! But why?

In the middle of the night, the Federal Reserve moved to make it cheaper to swap Euros for dollars, in a coordinated move with Switzerland, Canada, England, the European Central Bank and Japan.

From the Federal Reserve press release:

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system.

This is supposed to stem a global liquidity crunch. In other words, to prop up the Euro's value.

These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

More interesting the Central banks are offering swaps in multi-currency denominations:

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