Czech

All you need to know.

• According to an EU source, EU finance ministers failed to agree on raising ESM/EFSF EUR 500bln joint ceiling. However, Eurozone finance ministers agreed to provide EUR 150bln in bilateral loans to the IMF for bailout use, according to an EU statement
• Stronger than expected IFO data from Germany, together with successful T-Bill auctions from Spain helped risk-appetite
• Weakness in the USD-Index provided support to EUR/USD, GBP/USD, commodity-linked currencies, and WTI crude futures

As noted over the weekend, the UK, having vetoed the December 9 summit, has made it clear it would also likely back out of its IMF mandated contribution to save the Eurozone. In other words, the €30.9 billion that was supposed to come from the UK to rescue French and Italian banks, is now probably gone, a move which threatens to topple the latest Plan Z euro bailout in which broke countries pool money to bailout the same broke countries. Sure enough, Dow Jones confirms it:

• EU loans to IMF likely to fall short of expected EUR 200bln according to sources 
• Eurozone may move on IMF loans without immediate UK support according to a EU source

And while below we present the latest breakdown of IMF contribution by member countries, courtesy of Reuters, how long before populist pressure in various Eurozone (and especially non-Eurozone) countries threatens to topple governments unless each and every "joint and several" contributor country pulls a UK? Because if the UK is allowed to save taxpayer funds, why not everyone else?

All you need to read.

For the first time in while, Gluskin Sheff's David Rosenberg recounts his always informative chat session with Bob Farrell and shares Farrell's perspectives on the market ("his range on the S&P 500 is 1,350 to the high side and 1,000 to the low side. He was emphatic that there is more downside risk than upside potential from here. His big change of view is that we have entered a cyclical bear phase within this secular downtrend (he sees the P/E multiple trough at 8x). Rosie also looks at Europe and defines the term that we have been warning against since May of 2010: "implementation risk" namely the virtual impossibility of getting 17 Eurozone countries (and 27 broader European countries as the UK just demonstrated) on the same page when everyone has a different culture, language, history and religion... oh, and not to mention animosity to everyone else. So yes: Europe in its current format is finished, but what will it look like in its next reincarnation? And why does he think the European liquidity crisis will become a full blown solvency crisis in Q1 2012? Read on to find out.

...but if Fitch changing the outlook from positive to stable on Bulgaria, Czech, Lativa, and Lithuania can push us down 0.5% then if you are long, you need to be putting on some sort of a hedge. I'm not a big fan of puts, and maybe this isn't the news that caused the market to go down, but if it is, then that is scary.

• Tensions Rise at EU Summit (WSJ)
• Cameron faces showdown with Sarkozy (FT)
• Euro Leaders’ Fiscal Union Pact Leaves Next Step to ECB (Bloomberg)
• IMF China Chief Says Worsening Crisis May Force Hong Kong to Back Banks (Bloomberg) - same China expected to bail out Europe again
• Putin blames Moscow protests on US (FT)
• Boehner: Payroll Tax Cut Can Pass U.S. House (Bloomberg)
• EU Leaders Drop Demands for Investor Write-Offs (Bloomberg)
• Japan Imposes New Iran Sanctions (WSJ)

• Germany insists on new treaty for Europe (FT)
• Banks Prep for Life After Euro (WSJ)
• Bank Values in Europe Fail to Lure Buyers (Bloomberg)
• Banks' Ratings Reliance Nears End (WSJ)
• BOE’s King Waits to See Europe Crisis Response (Bloomberg)
• Accelerating U.S. Economy Eases Pressure for Further Fed Asset Purchases (Bloomberg)
• Government acts on payday loan worries (FT)
• Hong Kong May Loosen Property Curbs: Tsang (Bloomberg)

• Euro zone leaders may raise ESM, EFSF capacity limit (Reuters) - since denied by Germany
• EU talks on doubling financial firewall (FT)  - since denied by Germany
• Martin Wolf: Merkozy failed to save the Eurozone (FT)
• Ireland to seek cheaper bail-out (FT)
• Fast-track ‘fiscal compact’ drawn up (FT)
• Clarke rejects call for EU power grab (FT)
• Obama Sets Campaign Theme as ‘Make-or-Break Moment’ for the U.S. Economy (Bloomberg)
• Spain Weighing a Fast, Costly Cleanup of Banks (WSJ)

• Merkel, Sarkozy Unite as S&P Issues Warning (Bloomberg)
• Austerity package key to Italy averting collapse (FT)
• GOP Rejects Democrats' New Payroll-Tax Bill (WSJ)
• Europe can get out of crisis (China Daily)
• Belgium, at Last, Forms Government (WSJ)
• Geithner to Add US Weight to Euro Zone Talks (CNBC)
• Asia Faces ‘Much Greater’ Global Risks: ADB Says (Bloomberg)
• Understanding sectoral balances for the UK (FT)

• Monti cabinet agrees Italy austerity plans (FT)
• Sarkozy, Merkel kick off week of crisis talks in Paris (Reuters)
• China to prepare for social unrest (FT)
• China to stabilize exports, expand imports amid lackluster global demand (China Daily)
• U.K. banks face higher financing costs (FT)
• Reid Seeks to Break Impasse on Payroll Tax Cuts, Unemployment (BusinessWeek)
• U.K. Economic Growth Forecasts Cut by EEF as Manufacturers See Stagnation (Bloomberg)
• Germans Remain Unflappable During Euro Crisis (Spiegel)
• Wolfgang Munchau: France and Germany look set to fudge it yet again (FT)

All you need to know.

The massive cornerstone of support for the euro—German exporters—just cracked: "We need a common market, not one currency.”

All is well ... the EFSF will quietly monetize the radiation ...

Looking ahead in the upcoming week, markets will likely scrutinise the first steps of the new Greek and Italian governments. The appointment of key cabinet positions will be of relevance to establish credibility. However, it may be a bit too early for the first concrete policy steps. Beyond politics, three themes dominate the data schedule. First, there is a raft of Q3 GDP releases in Europe (Germany, France, Eurozone, Hungary, Poland, Czech Republic). The numbers will likely still be mixed with more uniform weakness expected in the Q4 numbers. Second, we will see the beginning of the monthly survey season with the US Empire and Philly Fed releases. Finally, there is a raft of Fed speakers scheduled to talk about the economy and Fed policy. Less thematic but also relevant are retail sales numbers in the UK and the US. Of course, we will have a look at the monthly TIC numbers to gauge the capital flow pressures for the Dollar.