EU gearing up for ‘mother-of-all’ summits

[Barron]

2012-JUN-25

Islamists claim power in Egyptian elections, and tensions between Syria and Turkey are on the rise following the Syrian military shooting down a Turkish fighter jet on Friday. As ZeroHedge notes, ***8220;Syria has recently become a major symbol for NATO vs the Russia-China axis.***8221; All 28 NATO allies will be meeting on Tuesday to discuss the incident. Is this a prelude to western intervention in Syria? The long hot Middle Eastern summer could have some nasty surprises in store for us. Lack of quantitative easing could turn out to be the least of markets***8217; concerns.

Further west, European Union politicians are gearing up for what AFP is describing as ***8220;the mother-of-all summits***8221; on Thursday and Friday. At stake is the eurozone***8217;s progression towards economic union, and Brussels***8217; need "to send a message to the markets that the continent's leaders are united and determined to do whatever it takes to restore confidence in the battered single currency". EUReferendum.com comments:

***8220;What Europe needs, says [European Council President] Rompuy, is ***8216;not only to make recommendations and then anyone can do what he wants, but to make them mandatory***8217;. There is no equivocation here. The Council president is talking about a new phase of European integration, with the meeting set to discuss what integration steps can be tackled.***8221;

The euro could start drifting up towards the $1.50 mark again ***8211; over the coming months ***8211; if markets start to think that eurozone fiscal union will happen. Deutsche Bank thinks that the euro has had its worst spell of the year, and that market attention will again turn to fiscal challenges and uncertainty in the US ahead of November***8217;s presidential election.

Speaking of fiscal challenges and uncertainty, the Bank for International Settlements issued a stark warning over the weekend about the dangers of over reliance on ***8220;overburdened central banks***8221;. In its words: ***8220;central banks are being cornered into prolonging monetary stimulus as governments drag their feet and adjustment is delayed. This intense pressure puts at risk the central banks' price stability objective, their credibility and, ultimately, their independence."