The European Union will move toward a Euro-wide bank supervisor, meaning the European Stability Mechanism will be able to recapitalize banks directly.
The announcement was made late Thursday from the European Union Summit. Euro banks shares have rallied 5% as a result.
“The agreement is a solid step in the right direction for Europe,” says Benjamin Reitzes, senior economist, BMO Capital Markets. “These measures should buy Europe some time, but a year-end target for the bank supervisor might be pushing it. This should open the door to an ECB rate cut next week.”
However, Reitzes is concerned the measures may not be enough to contain worries for the next six months.
What does this mean for Canada?
“With April’s results, the Canadian economy will still have to work hard to top the 2% growth mark, but the chances are quite a bit better than before this report,” says Robert Kavcic, an economist at BMO Capital Markets. “Still, given that the Bank of Canada’s first-half forecast, 2.5% in Q1 and Q2, overshot the mark, and with the Fed easing through year-end, we expect the bank to remain on hold until July 2013,”
In April, the Canadian economy expanded by 0.3%, slightly ahead of projections. Mining output strengthened by 2.7%. Oil and gas jumped 2.4%. Potash output rallied, up almost 30% in the past two months. Wholesale trade and transportation are up 1.2% and 0.7% respectively.