Markets prepare for turmoil over fears of new European credit crunch
Doubts over legal basis of EU ‘fiscal compact’ and warning of fresh slump leave markets unsettled
guardian.co.uk, Sunday 11 December 2011 15.29 EST
A warning that Europe could fall back into a renewed credit crunch and serious doubts about the legal basis of last Friday’s agreement on a “fiscal compact” for the eurozone could provoke fresh turbulence on markets this week.
After initial surprise about the market reaction to the UK veto of the early hours of Friday, some EU officials fear the lack of certainty about the real scope of the new deal could severely unsettle them.
This nervousness is heightened by continuing arguments over the scale and nature of any intervention to shore up the eurozone and resolve the sovereign debt crisis by both the International Monetary Fund and European Central Bank.
“We were quite surprised that the markets reacted as well as they did on Friday,” EU officials said on Sunday. “We thought they would really tank and there’s still this legal uncertainty hanging over the deal.