Last week, the People ’s Bank of China and six major central banks in the world joined forces to save the market. After a brief boost, market confidence began to rationalize the global economic recession and the debt crisis in Europe.
The focus of the market turned to the EU summit on December 9. The market regarded this meeting as a key meeting that determines the fate of the euro. If the EU summit achieves positive results, the metal is expected to boost the rebound. If the summit fails to reach an effective settlement mechanism, the metal cannot escape.
EU Summit Highlights:
1, Fiscal integration
The EU Summit will try to promote fiscal integration in the euro area and reach a new "fiscal treaty", namely, to constrain the fiscal budget discipline of countries in a legal and actionable manner, and to strengthen the consistency of economic policies among countries.
Fiscal sovereignty is an extremely sensitive issue. Turning over the power of taxation, expenditure, and borrowing in a sovereign country is a very significant change for any democratic government. The uncertainty and risks involved can be imagined. Moreover, there are still differences between Germany and France over the degree of fiscal integration: Germany wants to completely hand over fiscal sovereignty to a unified eurozone budget regulator, while France advocates giving up fiscal sovereignty as little as possible.
2, Amend EU Treaty
German Chancellor Angela Merkel issued a policy speech in the Bundestag on the 2nd, stating that the EU treaty should be amended to build the euro zone into a fiscal union to overcome structural defects in the economic and monetary union. Merkel emphasized that the foundation of this alliance must be continuously strengthened, and the EU treaty must be modified to overcome structural defects.
Specific measures proposed by Germany include the need to establish solid stability guidelines, a “new debt limit”, and to make this legally binding ceiling allow no political bargaining room; strict control of members through the European Commission Compliance with national fiscal discipline; once a member violates the stability criterion, sanctions automatically take effect, the European Commission has the right to interfere with the member's budget; the European Court of Justice can exercise litigation powers against the deficit-violating country. In addition, in order to create jobs, structural reforms are needed to achieve more growth, rather than relying on debt models.
German Chancellor Angela Merkel responds to European debt keywords: austerity, debt reduction, contract amendments, decentralization
Deflation: Countries in crisis must implement fiscal austerity measures.
Debt reduction: Countries in crisis must develop credible deficit reduction and debt reduction plans.
Amendment: Amend the relevant treaties between the European Union and the Eurozone to promote fiscal integration between the Eurozone and the European Union.
Decentralization: Member States must give up part of their fiscal sovereignty.
French President Sarkozy's response to European debt Keywords: debt issuance, intervention, rights protection, capital increase
Debt issuance: Strongly advocate the issuance of European Union bonds.
Intervention: The European Central Bank is strongly urged to act as the lender of last resort to purchase bonds of countries in crisis in order to provide banks with liquidity.
Rights protection: Give up as little fiscal sovereignty as possible.
Capital increase: Do everything possible to increase the ammunition of the European Financial Stability Fund.
Germany and France have different footholds in dealing with the European debt problem. Germany hopes that countries in the euro zone will tighten their belts, implement austerity and reduce deficits, and hope that countries will turn over fiscal supervision to achieve Germany's ambition to dominate the entire euro area. Unwilling to see the euro zone eventually evolve into the "German Mark", and advocates giving up fiscal sovereignty as little as possible. There are differences of interests between the two countries, and the process and outcome of the mutual game will directly control the direction of the metal market.
But one thing is for sure, neither Germany nor France will let the euro zone collapse. The loss caused by the disintegration is far greater than the turbulence caused by the continuous consultations, games, and compromises between the two countries.
British Prime Minister Cameron: Once the euro zone disintegrates, it will have a huge negative impact on the British economy. The euro area needs to take all measures to defend the euro, and every effort needs to be made to ensure the success of the EU summit.
US Treasury Secretary Geithner: US Treasury Secretary Geithner will fly to Europe this week to meet with leaders of the European Central Bank (ECB), Germany, France, Italy and Spain. Geithner has been actively discussing with European leaders on the eve of the crucial EU summit on December 9, saying he wants to prevent the European debt crisis from spreading further.
NYSE trader Stephen Guifoyle: The news of the EU summit has repeatedly disappointed us. At present, we dare not hold any hope.
Italy releases reform package on December 5
Greece vote on 2012 budget on December 7
December 8 ECB monetary policy meeting
EU summit on December 9
Investors' confidence has almost collapsed after the market has experienced big and small summits. This EU summit is another effort by European leaders to try to reverse the worsening debt crisis in Europe following the two summits in late July and late October.
If the summit does not reach an effective settlement mechanism again, it is difficult for metal prices to escape the risk of falling; if the summit finally reaches a substantive agreement, the market will rekindle hope, which may also be a periodical turning point.