At the European Summit, Italy, France, and Spain did their best to gang up on Germany, but didn’t get much in return. Merkel is still vehemently opposed to euro bonds, and I don’t see that changing, no matter what.
Italy and Spain will find it easier to get aid from the European bailout fund (the European Stability Mechanism or ESM), but the ESM didn’t get any more money. Its maximum is still about $633 billion, when Italy and Spain owe about five times that amount.
The ESM will put money directly into Spanish banks rather than using the Spanish government as a pass-through. And private bondholders of Spanish banks won’t be subordinate to government bond holders.
Such tiny steps have failed to satisfy the markets in the past.
By refusing to “go big,” Europe’s leaders are setting up the euro zone to go bust.