It’s important to understand what the European leaders did not achieve. There was no indication of a shared program to promote economic growth, ultimately the only way to get out of the crisis. There was no commitment to reduce expenditures. There was no clarification of the role that the European Central Bank should play. The main accomplishment in Brussels was a preliminary agreement to begin to pursue mechanisms to control debt. Yet these rules, including Merkel’s goal of an automatic Schuldenbremse—a brake on debts—have yet to be spelled out clearly and integrated into law. In most cases, they will be subject to review by national parliaments, and the approval process will not be quick, even though the sovereign debt crisis remains urgent and the viability of the Euro is by no means assured. Bond markets have signaled considerable doubt that the Brussels summit achieved much at all.And it's not just the bond markets. Commodity markets have also given a big thumbs down. From Fox Business:
Growing fears that a deep European recession may be unavoidable drove oil prices down Wednesday to their lowest level in more than two months.
Commodities across-the-board were being hit with a broad selloff.
If European leaders are unable to contain the long-running debt crisis, fragile economies in Spain and Italy could face the same fate as Greece’s, which has been teetering on the brink of default for months.
Austerity measures sought by German Chancellor Angela Merkel, currently Europe’s de facto leader, and the European Central Bank could also push Europe into recession. Cutting government spending across Europe will crimp demand for all manner of commodities, in particular crude oil and other raw materials used in manufacturing.
Oil futures were down $4.32, or more than 4%, at $95.82 in midday trading on the New York Mercantile Exchange.
Meanwhile, the price of gold fell nearly $100 to $1,565.70 an ounce, and Standard and Poor’s GSCI index of raw materials was down 3.4%. The dollar rose sharply against other currencies as investors sought a safe haven.