| Euro Zone Eyes Tight Fiscal Union To Ease Crisis and U.S. Keeps AAA Rating, But Fitch Turns Negative |
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Meantime, European debt auctions weren't as bad as feared but were still worrisome. Bigger bond sales loom this week, with last week's failed German auction still fresh.France and Germany are leading an effort for a pact that would create more budget enforcement tools. A fiscal union with a veto over members' budgets could give the European Central Bank cover to significantly expand its bond buying — now seen as the only possible answer to the spiraling crisis.ECB and German officials remain staunchly opposed to large-scale purchases before governments enact credible reforms.Stocks rallied globally on European optimism after last week's dive on European pessimism. The Nasdaq rose 3.5% and the S&P 500 2.9%.While Cooper believes a fiscal union is necessary, she doubted France and Germany could agree quickly, much less all 27 nations in the European Union or the 17 euro zone members. [Read the full article] To save time in the future, you may select one of the preferences below. You may update your eIBD preferences at any time by going into My IBD and selecting Update Your eIBD Preferences.Set Web-Based Version as Default Set PDF Version as Default Set Recent Issues as DefaultCongressional Budget Office deficit projections rest on a curious assumption that the economy was "normal" at the height of the real estate bubble.In other words, the official budget scorekeeper believes the economy and job market were operating right in line with their long-run potential — not too hot and not too cold.Further, the CBO presumes a return to the pre-recession trajectory by 2017, with virtually no long-term effects from a lost economic decade.But as some economists scale back forecasts of potential output and unemployment, the CBO is starting to look unduly optimistic. [Read the full article] The Federal Reserve, European Central Bank and their counterparts in the U.K., Canada, Japan and Switzerland will make it cheaper for European banks to obtain dollars, which have been in shorter supply since U.S. money market funds began limiting their euro zone exposure.The move, akin to efforts taken at the height of the 2008 financial crisis, will help head off a brewing liquidity crunch for banks rather than attack the long-festering government solvency issue."I would call it a prudent move but something that won't fix Europe," said Robert Dye, chief economist at Comerica.The S&P 500 surged 4.3% on the news as well as upbeat U.S. economic data. Global financial giants soared. Bond yields for Italy, Spain, Germany and France fell.Meantime, Europe's leaders kept fiddling with a rescue fund that was beefed up at a late October summit but is widely seen as far too small to contain the crisis. The spotlight now turns to yet another European Union summit on Dec. 9. [Read the full article] 
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