Merkel and Sarkozy on Bank Recapitalization: Promises, Promises

Global financial markets appear buoyant anew on news of more promises of political rescue efforts

From Bloomberg, (bold highlights mine)

Angela Merkel and Nicolas Sarkozy, racing to stamp out the euro debt crisis threatening to engulf the financial system, gave themselves three weeks to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance.

“By the end of the month, we will have responded to the crisis issue and to the vision issue,” the French president said in Berlin yesterday at a joint briefing with the German chancellor before they dined at her office.

Under rising pressure to defuse turmoil that’s raged for 18 months, and facing growing concern Greece is headed to a default, Merkel said European leaders will do “everything necessary” to ensure that banks have enough capital. Sarkozy said they would deliver a plan by the Nov. 3 Group of 20 summit…

After their eighth bilateral summit in 20 months, the two leaders unveiled no new agreement on what role should be played by the bailout fund, the European Financial Stability Facility, amid reports that they differed on how to use it.

“We will recapitalize the banks,” Sarkozy said. “We’ll do it in complete agreement with our German friends because the economy needs it, to assure growth and financing.”

European banks need as much as 200 billion euros of capital, Antonio Borges, the International Monetary Fund’s European department head, said last week.

European leaders are bracing for the consequences of a Greek default. German Finance Minister Wolfgang Schaeuble told Frankfurter Allgemeine Sonntagszeitung that euro governments may have come up short on the scale of Greek debt writedowns when they reached the agreement in July. He cited a “great risk” that the crisis could spread further.

Eventually markets will get satiated by the many promises that have been meant to be broken

From the refrain of Naked Eyes’ Promises, Promises

You made me promises, promises

Knowing I'd believe

Promises, promises

You knew you'd never keep