Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Head of Macroeconomic Research
Summary: EU leaders have been in Brussels since past Friday for the longest EUCO meeting since that of Nice in December 2000 in order to discuss the new MFF (Multi-Financial Framework) and the EUR750bn recovery fund to cope with the COVID-19. They have not been able to find a compromise yet as the Frugal Four + Finland block progress on the Recovery Plan for Europe. The Summit ended at 6.00 am today (Brussels time) and is expected to resume at 4.00 pm after a well-deserved rest. Despite a lot of acrimony and frustration, there is a strong determination shared by all participants to reach an agreement, but we fear that Michel's ambitious proposal is likely to be watered down significantly, which would mean this is again a missed opportunity for the EU to show real solidarity and move towards the completion of the monetary union.
I think we can all agree this is not Europe’s Hamilton moment, but this is a great telenovela. The best case scenario is that an agreement is reached today or tomorrow.
We see at least three main points of disagreements emerging over:
When the EUCO resumes today at 4.00 pm, EU leaders will discuss a new negotiation box covering three main topics:
Comment:
Knowing how the EU is functioning, it was obvious from scratch that Michel’s ambitious proposal would be watered down significantly, but not as much. The deal that will likely be agreed will clearly not be important enough to cope with the magnitude of the crisis. This is a missed opportunity for the EU to create a powerful solidarity instrument based on debt mutualisation that would be macro-significant and that would constitute at the same time a strategic move towards the completion of the monetary union. On top of it, it shows how deep is the EU fragmentation and that national interests often prevail, even when only a few tens of billions of euros are at stake. Given the level of acrimony and frustration reached over the past three days, this EUCO will probably have deep long-term consequences on the functioning of the EU and will intensify the rift between North and South. Not saying that this is the first step towards the Netherlands leaving the EU, this is very implausible, but it is certain that trust between member states, based on cooperation in good faith, which is at the very core basis of the European construction, has been broken and it will take a lot of time to rebuild it. This is definitely not what we have been dreaming of…
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)