Eurozone Forced to Press On Without Britain

Joel Anderson |

Hopes that the entire 27 member nations of the European Union could be convinced to ratify the treaty changes proposed by German Chancellor Angela Merkel and French President Nicolas Sarkozy were dashed Friday when Great Britain refused to sign on. However, news that the member states of the eurozone intended to press forward with the pact helped markets make gains today.

Britain Uses Veto

European leaders went through marathon negotiations that lasted through the night in hopes of finding a compromise that would allow the European Union to move forward with a new fiscal pact that would bolster the confidence of lenders. The initial plan to amend the EU treaty to include stricter new rules on budgetary discipline and require member nations to cede some sovereignty to a central European authority was nixed after British Prime Minister David Cameron refused to sign on to the deal and exercised Britain's right to veto any potential changes. The deal, though, will still be implemented through an agreement by the 17 eurozone member nations. Tensions ran high, with Sarkozy expressing his dissatisfaction with Cameron's hold-out and veto. "If you want to be able to opt-out, to not be in the euro but participate in all decisions of the euro . . . and on top of that criticize it, that's not possible," Sarkozy said. Cameron, though, was unapologetic for acting in what he saw as Britain's interests. "We're not in the euro and I'm glad we're not in the euro," said Cameron to reporters early Friday morning. "We're never going to join the euro and we're never going to give up this kind of sovereignty that these countries are having to give up."

New Framework Provides Path Forward, Markets React

The new deal calls for all eurozone members to run balanced budgets, with nations running annual "structural" deficits of no more than 0.5 percent of GDP with a concession for a temporary increase to 3 percent of GDP during tough economic times. What's more, leaders agreed to make another $267 billion in funds available to the IMF through bilateral loans to lend out to troubled members of the eurozone. European nations are trying to avoid a financial meltdown that would most likely send the continent's economy into a downward spiral of recession. Taken all together, markets responded positively to the new agreement despite nagging questions about some of its details. The Dow Jones was up almost 1.5 percent in early trading, with the S&P and Nasdaq both up over 1.6 percent. While the jump showed optimism, the relatively modest gains may indicate that investors are optimistic but still measured in their decisions as yields on Italian and Spanish bonds rose and the cost for insuring that debt also increased. The euro rose to $1.3389 in midday trading from $1.3340 late Thursday.

Leading the charge were the usual suspects: major financial institutions. Only yesterday most of the major European banks were on the decline after Mario Draghi made comments that the European Central Bank (ECB) would not be engaging in an aggressive bond-buying program. Well, with an easing of tensions caused by the new agreement, many of the very same banks saw gains that offset most of yesterday's losses. Royal Bank of Scotland (RBS) gained just over 6.3 percent. Barclays (BCS) was up almost 6.75 percent, Lloyds Banking Group (LYG) jumped almost 6.5 percent, Deutsche Bank (DB) leapt about 6.5 percent, and Credit Suisse (CS) gained over 4.25 percent. American lenders with exposure to European debt were also beneficiaries of the framework for a new agreement. Morgan Stanley (MS) gained over 3.25 percent, Citigroup (C) was up over 4.5 percent, and embattled Bank of America (BAC) gained almost 3 percent.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
FBIZ First Business Financial Services Inc. 22.61 -0.13 -0.57 6,094 Trade
BCS Barclays PLC 9.97 0.21 2.10 2,541,505 Trade
C Citigroup Inc. 72.26 0.93 1.30 5,709,443 Trade
MS Morgan Stanley 49.23 0.53 1.08 2,541,413 Trade
DB Deutsche Bank AG 19.21 0.08 0.42 2,459,830 Trade
BAC Bank of America Corporation 26.81 0.19 0.71 27,151,234 Trade
RBS Royal Bank of Scotland Group Plc New (The) ADS 7.35 0.00 0.00 478,426 Trade
LYG Lloyds Banking Group Plc American Depositary Share 3.56 -0.00 -0.05 854,249 Trade


Emerging Growth

Liberty One Lithium Corp

Liberty One Lithium Corp is a mineral exploration company engaged in acquisition and development of high grade lithium brine deposits.

Private Markets

iPRO Network, LLC

We provide the platform, tools, and resources to empower individuals and professionals to market desirable goods and services to the public, taking the place of traditional methods of commerce.

The Green Organic Dutchman

The Green Organic Dutchman Ltd. ("TGOD") produces farm grown, organic cannabis for medical use. The company grows its high quality organic cannabis in small batches using craft growing, all natural…