German Chancellor Angela Merkel and French President Nicolas Sarkozy held their first meeting of the year on Monday in Berlin. The talks centered on the new fiscal discipline rules for the Eurozone, which are supposed to be ready by March this year and ways of stimulating economic growth and boosting employment in the area. The topic of the expansion of the EU rescue fund was also touched upon.
Angela Merkel announced at a press conference following the meeting that the talks on the new fiscal rules were progressing well and some of them might be already fit for approval at the EU summit which will take place at the end of January. The Chancellor also commented on the issue of the next tranche of the bailout for Greece, the release of which will be held back until the indebted country fulfills all the necessary conditions. "We must see progress on the voluntary restructuring of Greek debt," said Angela Merkel at the press conference.
She also emphasized that no country should secede the EU, although according to Kathy Lien, Director of Currency Research for GFT: “no one believes the Germans and French when they say that no country will leave the Eurozone because unless they are willing to work more quickly and make some major commitments, it is out of their hands.”
It was also made known that Berlin will host IMF Chief Cristine Lagarde on Tuesday and Italian PM Mario Monti on Wednesday.
SNB chief steps down amid scandal
Philipp Hildebrand announced on Monday his resignation as SNB President, after information was revealed that last August his wife had been selling francs shortly before the bank took action to cap the currency's rise.
Hildebrand's decision comes as a surprise, as only last Friday he declined to step down, arguing that he did not break the law and did not use his knowledge to help his wife with the currency deal.
EUR/CHF plummeted as low as 1.2107 after the resignation. Kathy Lien believes however that the final impact on the currency shouldn't be too strong: “The main concern was that the SNB would no longer consider a higher peg for EUR/CHF and may even back away from their current peg. However given how successful the peg has been, it is extremely unlikely that the Swiss National Bank will move away from the peg and for this reason the ultimate impact of Hildebrand's resignation on the Swiss Franc should be minimal.”
Germany sells bonds with negative yields
Earlier on Monday, Germany held a debt auction at which it managed to sell 3.9 billion worth of bonds, with the demand exceeding 1.8 times the amount on offer. For the first time in history Germany paid a negative yield, which stood at -0.0122%, joining this way Switzerland and the Netherlands which at present are the only European countries to have a negative yield at auctions.
