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A leaked draft of this week’s EU summit shows little change in coming policy and certainly nothing close to what is needed to resolve the Euro crisis.  Via Peter Boockvar:

“CNBC and DJ are reporting that EU members have agreed to proposals that have been discussed for weeks, 1)The creation of a fiscal compact that will likely encompass an EC commission that will stand as an oversight of EU budgets and a Court that will be the enforcer, 2)The ESM fully in place by July 2012 that will stand side by side with the EFSF instead of replacing it, 3)EU to follow IMF protocol on private sector involvement in debt restructurings which means voluntary debt exchanges instead of forced, and 4)Euro area central banks will likely provide the IMF with bilateral loans (which then get recycled into loans back to Europe).”

German officials are rumored to be rejecting the idea of the ESM becoming a bank.   I hope this is all wrong because it sounds like a total disaster.  But it is certainly looking like we’re not going to get e-bonds, fiscal union or an ECB bazooka.  The ECB confirmed this morning that they would not be buying bonds en masse.  In other words, we’re getting nothing of the magnitude that is now required.  This means periphery yields will blow out again, markets will tank, panic will ensue and the risks of a credit crisis increase substantially.  I’ll wait until seeing the actual proposal tomorrow, but this sounds very bad at first glance.

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