European leaders, basking in the glow of a Nobel Peace Prize and praise for their rediscovered crisis-fighting skills, meet this week as Greece seeks to justify renewed aid and Spain holds out on tapping a bailout.
The European Union’s leaders convene for an Oct. 18-19 summit in Brussels after a weekend in which international finance chiefs expressed some optimism that a firewall is in place to contain the euro’s turmoil and urged further action to quell the main threat to global growth.
With German Finance Minister Wolfgang Schaeuble today ruling out a Greek exit, the 17-nation euro area faces the challenge of harnessing positive sentiment by resolving differences on aid for Greece and Spain before investors pounce again. Also contentious is how to knit euro nations more closely together amid spats over the timing and depth of a banking union.
“The summit will highlight how much remains to be done,” said Alex White, an economist at JPMorgan Chase & Co. in London. “Our concern is that the removal of acute financial market stimuli may reduce the political incentive to deliver.”
That respite is the result of the European Central Bank’s bond-buying pledge last month and the enactment of a 500-billion euro ($647.5 billion) permanent rescue fund, the European Stability Mechanism. Nerves are returning to markets as Spain’s 10-year bonds advanced for a second week after Standard & Poor’s cut the nation’s debt rating to one level above non-investment grade.