End of Euro Crisis in Sight?

09/27/2011 2:57 pm EST


Jim Jubak

Founder and Editor, JubakPicks.com

Apparently it doesn’t matter if yesterday’s good news on the Euro debt crisis didn’t hold up. Today, there’s another good news story to take over.

And European stocks have followed up on yesterday’s rally with a huge push higher. The German Dax was up 5.29% today, the French CAC Index was up 5.74%, and Spain’s IBEX 35 Index was up 4.03%. (The best performance among major European indexes was turned in by the OMX Stockholm 30 Index, which was up 6.22%.)

This morning, the European Investment Bank went to some lengths to rebut yesterday’s story, which had the bank at the center of a new European guarantee mechanism that would have used leverage to create a 3 trillion euro ($4.09 trillion) capacity to buy troubled sovereign debt from European banks.

The bank said, "There have been media reports about a potential involvement of the EIB in a special purpose vehicle in connection with the EFSF [European Financial Stability Facility] for the purpose of bailouts. The EIB has not been approached, and has no plans to be involved in this.”

But picking up any potential slack in good news, Eurogroup President Jean-Claude Juncker told Reuters that he has been informed that representatives of the International Monetary Fund, the European Central Bank, and the European Union will return to Athens on Wednesday or Thursday.

Financial markets have been waiting for the return of this negotiating team to Greece since it left Athens earlier this month, after telling Greece that the country hadn’t met the goals it agreed on, and wouldn’t get its next $11 billion piece of rescue cash until it did. Since then, negotiations have been conducted by phone, but all sides have agreed that a deal would require the return of the international team to Athens.

I think it’s reasonable to conclude—and this is what the financial markets think too, it seems—that the team wouldn’t be going back to Athens unless a deal was in sight. Greece has said it would run out of money to pay pensions and government salaries around October 10 without this next cash infusion.

Next up on the Euro debt crisis checklist? The Bundestag’s Thursday vote on expanding the powers of the EFSF so that it can buy troubled government debt. Right now, it looks like the measure will pass the German parliament with something like an 80% majority.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. For a full list of the stocks in the fund as of the end of June, see the fund’s portfolio here.

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