CITI: Forget Those Merkel Comments, This Is The Headline Out Of Germany That Really Matters

In the last hour, markets got rocked from some Merkel comments about her not being cool with debt and burden sharing for as long as she lives.

There was some confusion about what the comments meant, and since they were made at a meeting of her party, they weren’t necessarily for public consumption in whatever form she said them in.

Anyway, Citi‘s FX guru Steven Englander blasted out this note…

The Merkel comments have dominated discussion over the last 15 minutes  and there is some ambiguity with respect to what she meant


The more important headline may be from BBG: GERMANY SOURCE: EU DISCUSSING TAKING SENIORITY AWAY FROM ESM which will give the euro a bit of a bounce if there is any retraction of the Merkel comments.

*Note, it’s possible that Englander is wrong about this being a Bloomberg headline as Bloomberg’s own Linda Yueh points out.

This latter point about ESM seniority is something that matters since one reason the Spanish bailout has been seen as so suspect is that the funds (if coming from the ESM) would supercede existing sovereign debt, thus threatening Spain’s market access.

If there’s something to this latter point, then this is a modest Euro positive.

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