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Angela Merkel “vows to build fiscal union,” we were told on Friday, after the German Chancellor’s speech to the Bundestag. I just don’t buy it. Market denizens are desperate for “fiscal union” before the end of the year. The phrase is code for the mighty Germany agreeing to stand behind the liabilities of the more profligate single currency members – something that frazzled debt markets crave.

Berlin will only allow the European Central Bank to let rip, the argument goes, firing up the “virtual” printing press like the US Federal Reserve and the Bank of England, if Germany exerts more control over the spending of other eurozone governments. So “fiscal union”, while under-pinning bond prices, would also spark the mother of all equity market rallies, as the ECB sprayed-out QE funny money. Shares would surge across the globe – which would be nice, just in time for Christmas.
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