Last week’s European Union summit ended without any dramatic changes to the way leaders will be able to deal with the crisis through 2013, according to Societe Generale’s James Nixon.From James Nixon:
And while this is presented as merely leaving the technical details to be sorted out later, with agreement reached on much of the substance, the reality (as the FT observed on Friday (1)) is that after months of negotiations, the deal struck by European leaders leaves the euro area with much the same powers to deal with Europe’s high indebted sovereigns that it did a year ago.
That being said, the summit did guarantee that in 2013, when the new ESM takes effect, restructuring for sovereign debt becomes a reality for bondholders. Nixon thinks markets are ignoring this at the moment, either disregarding the likelihood of the event or not understanding the possibility.
But if CDS prices are any suggestion, it does seem the market has a clear understanding of the threat now in place. Greece, Ireland, and Portugal are all in the top 5 most expensive contracts for 5-year CDS, according to Bloomberg data.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.