European leaders will try to rescue under-fire efforts to deliver new fiscal rules and cut Greece's debt burden, as investors ignore Standard & Poor's euro region downgrades.
The talks on Greece and budgets may serve as tougher tests of the tentative recovery in investor sentiment than S&P’s decision to cut the ratings of nine euro region nations, including France. History suggests fallout from the downgrades may be limited. JPMorgan Chase & Co research shows that 10-year yields for the nine sovereigns that lost their AAA status between 1998 and last year’s US downgrade rose an average of two basis points the next week.
Luxembourg Prime Minister, Jean-Claude Juncker, said the EFSF’s shareholders will explore ways to maintain the top rating of the fund, which is scheduled to sell up to €1.5 billion in six-month bills this week. In the meantime, Merkel and other European leaders have pledged to move quickly towards setting up its permanent successor, the European Stability Mechanism, this year -- one year ahead of the original plan.
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