EU Finance Ministers Drop the Ball and Pass the Buck

Eurozone finance ministers came out of a meeting that was meant to save the euro without a plan to stop a eurozone financial collapse. The financial markets were hoping that the 17 eurozone finance ministers would emerge from their meeting with a bold new plan to avert financial disaster but they had little to show for their efforts. Instead, the pressure will be on their bosses to come up with a rescue plan when the heads of state meet on December 9. Until then, financial markets will be left wondering if there is enough political will among the eurozone leaders to come up with a comprehensive plan that addresses all of the issues that are causing the eurozone's sovereign debt crisis. Greece was given the latest installment of its rescue package, an 8 billion euro ($10.7 billion) payment that will allow the embattled country to pay its bills. However, Greece was expected to receive the bailout funds and traders were hoping to see something more robust from the finance ministers. As a deal to save the euro continues to elude European leaders, Spain and Italy have watched their borrowing costs rise as the eurozone finance ministers dithered over what actions they could take in order to restore investor confidence in the eurozone. If their borrowing costs continue to climb, Italy and Spain could be the next two eurozone countries to seek bailouts. While the European Union has been able to rescue Greece, Ireland and Portugal from default, it's unlikely that it would be able to do the same for Spain or Italy under present conditions. One of the ways to restore investor confidence would be to give veto power over individual state budgets to a central European Union authority. Then troubled countries like Greece and Italy would be less likely to roll back unpopular austerity measures aimed at reducing their fiscal deficits. However, this would be a major step and could face opposition by many citizens of the European Union. Another way to quickly reduce borrowing costs would be to create eurobonds issued by all eurozone members or to allow the European Central Bank to buy unlimited amounts of European sovereign debt in order to drive bond yields lower. However, both of these measures are opposed by Germany and will never happen unless Germany agrees to them. As things stand, the markets will have to continue waiting for the European Union's leaders to come out with a plan to prevent a series of defaults across the European Union and the end of the euro currency.

Traders who believe that Europe's leader will finally come to their senses and announce a plan that the markets will accept might want to consider the following trade:

Traders who believe that the inaction on the part of the 17 eurozone finance ministers is just more of the same may consider alternate positions: