Simone Foxman
Dec. 29, 2011
As the news cycle winds down for the year, it remains clear to investors that the eurozone crisis is far from over.
After action by the European
Central Bank last week to shore up bank liquidity, investor sentiment has
soured. Banks are storing a record level of deposits with the ECB, Greece is
still in the doghouse, and although Italian and Spanish bond yields have eased
momentarily, analysts doubt that trend will continue indefinitely.
Fear is still driving trading, and here are the biggest dates ahead that
could make or break a crisis solution.1. Friday, December 30
Image: Wikimedia commons
The Spanish government and its newly empowered center-right government will announce emergency budget measures to ensure that it will meet its budget deficit targets for the coming year. The final budget will probably be presented in late March.
The Bank of Spain announced today that the Spanish economy has already begun to contract in the last few months. While Spain's public debt is under control right now, negative growth will make it even more difficult for Spain to meet its budget targets and weigh on the market sentiment which has already increased borrowing costs for the Spanish government.
We could also hear hints about what the government plans to do to mitigate the problems with Spanish banks.
2. Wednesday, January 4
Image: Wikipedia
A flash CPI estimate for the euro area could influence the European Central Bank monetary policy decision a week later, and show just how fast the euro crisis is slowing down the economy.
According to Bloomberg, analysts are expecting inflation to decline to 2.8% in December from 3.0% a month earlier. A surprise to the downside would indicate that further, possibly even more radical, ECB action could be in the works.
3. Saturday, January 7
Spanish business leaders and unions must reach an agreement on labor reform by this date. The agreement will center around education, holidays, measures to settle disputes outside the workplace, and worker attendance rules.
Spanish newspaper ABC reports that they have already made substantial progress towards this agreement, however this agreement, coupled with budget amendments, could ignite protests if it threatens worker pay or employment.
4. Monday, January 9
Image: New York TImes Syndicate
While not yet confirmed, a European official told Dow Jones that German Chancellor Angela Merkel and French President Nicolas Sarkozy could meet in Berlin on January 9 to discuss the Franco-German approach to economic policies in the eurozone.
In the past, Merkel has dominated these meetings. Although the pair comes out saying that they are in "complete agreement," subsequent statements by French officials often indicate that tensions between the two leaders run higher than they'd like to admit. A shift towards the French viewpoint would indicate willingness to pursue more radical policy action to fix the crisis.
Confirmation of such a meeting would likely occur next week.
5. Thursday, January 12
Image: AP
The Governing Council of the European Central Bank will meet on January 12 in Frankfurt to make its January monetary policy decision at 7:45 AM ET. ECB President Mario Draghi will give a press conference about the decision at 8:30 AM ET.
Consensus appears to be leaning towards another 25bps cut, and cool German CPI numbers today could add to that. Euro area CPI numbers could also shape the policy decision. We'll be looking for talk of "downside risks to price stability" or the announcement of new non-standard measures.
6. Friday, January 20
Image: en.wikipedia.org
January 20 is expected to bring the end of the latest round of troika (EC/ECB/IMF) talks in Greece. These talks are meant to determine the conditions that must be met to disperse the next round of bailout aid from the second bailout deal.
However, these talks are more likely to drag on or resume for another round, as private investors aren't scheduled to come to a deal on bond swaps until later in the month. Failure to reach a deal would threaten IMF involvement and could make a credit event inevitable.
7. Monday, January 23
Image: Pawelmorski
Eurozone finance ministers will meet ahead of a European summit the following week. We'll probably start hearing about their latest plans to take action to address the eurozone crisis around this date.
8. Tuesday, January 24
Image: Wikimedia Commons
Finance ministers from all 27 EU countries will meet to discuss economic policies.
Key here will be the relationship between U.K. minister George Osborne and the euro area ministers. U.K. PM David Cameron has sparred with eurozone leaders led by Merkel and Sarkozy lately, most recently in a refusal to pledge $50 million to the IMF to support the crisis effort.
Increasing tension between the eurozone and the non-euro area could change the structure of the EU.
9. Monday, January 30
Image: AP
EU leaders will meet for a summit on January 30, this time focused on addressing high unemployment across the euro area.
Most recently, Germany appears to be backing a new fund directed at stimulating growth in Ireland, Portugal, and Greece, so we will likely hear more about this new plan in the lead-up to the summit.
Economic developments in the coming month, however, could shift the focus of the meeting.
10. Tuesday, January 31
January 31 marks the deadline for private holders of Greek bonds to agree to a swap deal with the Greek government.
While these talks have largely been conducted behind closed doors, the prognosis for a successful deal appears grim. Private bondholders are unenthused by the prospect of stomaching 50% losses on holdings of Greek debt, jeopardizing the voluntary participation necessary to avoid a credit event.
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