George Kerevan: Euro rescue at last taking shape, but it’s no done deal

IT MAY be one minute to twelve in the euro crisis, as the bosses of Philips, Shell and Unilever put it yesterday in a burst of unusually colourful corporate prose, but there were definite signs this week that Europe is getting its act together.

Global equities extended their gains yesterday, showing the biggest weekly rise for three years. Yields on suspect eurobonds fell, though they remain in the danger zone. Market sentiment was buoyed on positive US labour data, on Wednesday’s central bank moves to provide cheap dollars for Europe’s beleaguered banks, and, above all, on a feeling that European Union politicians at last had a plan in place to save the euro.

We’ve been here before – in July, when the big Greek bailout plan was announced, and in October, when an EU summit agreed a huge extension to the European Financial Stability Facility through financial leveraging. In both cases, the markets had a brief bout of euphoria. But then, when rhetoric was not matched by deeds, euphoria turned to depression. Yet, there is evidence the EU might – at long last – be edging towards a workable plan to steady the euro, at the latest summit meeting on Wednesday and Friday next week.

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The hold-up to date has been Germany’s unwillingness – for domestic and constitutional reasons – to let the European Central Bank (ECB) act as a lender of last resort to bankrupt EU governments, or to countenance collective eurobonds. In a risky game of “who blinks first”, chancellor Angela Merkel has been holding out for a new fiscal framework that would impose a central EU veto over the budgets of individual eurozone countries, legally enforced by the European Court of Justice.

Commentators thought Merkel’s demand would be vetoed by other EU members. Or prove too difficult to implement in time to save Greece et al from defaulting, because of the treaty changes required. Now, it seems, she may have got her way and that next week’s summit will fast-track a new European fiscal union. Even David Cameron may have blinked and let Merkel have her way, though it will be interesting to see how he fudges this to keep his Eurosceptic backbenchers on side.

In return, the German media is suggesting Merkel will let the ECB boost purchases of eurobonds massively to steady the markets, as a temporary fix until new budget controls are in place. Berlin is not congenitally opposed to the ECB acting as a prop to European banks, only to governments. The ECB’s new boss, Mario Draghi, weighed in on Thursday with hints he will shore up bond markets through quantitative easing, provided Merkel’s “fiscal compact” is agreed.

Will it work? Merkel wants an all-EU deal, not just a eurozone one, so it’s conceivable the proposals might unravel by next Wednesday if some countries can’t deliver – keep your eyes on Cameron.

Even then, the fix might come too late.

We face a race between any new fiscal rules working and a European recession that’s probably already here. The recession will increase deficits. That could provoke a fresh sovereign debt crisis and worsen bank illiquidity. Which means Merkel may yet have to blink over the ECB becoming a sovereign lender of last resort, or transforming the EFSF into one, if that keeps the German constitutional court happy.

If you can identify today’s Superman, buy a copy

ONE investor who is happy this week is the actor Nicholas Cage, who sold his first edition Superman comic for a record $2.1 million (£1.4m). It cost 10 cents back in 1938. Cage bought his copy of Action Comics #1 in 1997 for $150,000.

Comic prices are outpacing most of the investment market. A first edition Beano went for £12,100 in March 2004 – there are only 12 known copies. This price was surpassed by a copy of Dandy, which fetched £20,350 in September 2004. Sadly, a mint first edition of Dan Dare’s flagship Eagle (my favourite) is worth only about £200.

What modern children’s treasure will be prized in the future? The Battlefield 3 computer game has shipped 10 million copies in the first week of its pre-Christmas release. Will someone pay $2.1m for it in 73 years’ time?