Successful summit can restore confidence in eurozone

ON EUROPE

Obviously, the euro crisis remains the main story, especially if the 9 December summit underwhelms investors the way the 26 October Summit did. Disappointment will see yet another leg down in markets and further deterioration in sentiment across the European macroeconomy.

The need for European banks to delever and reduce the size of their balance sheets, along with prolonged short-term funding difficulty on wholesale money markets, has resulted in a severe credit contraction across the continent. Large corporations can navigate this well enough, while small and medium-sized enterprises report a significant lack of access to lending availability from bankers. Continued austerity in Greece and Portugal, combined with expectations of similar policies in Italy and Spain, will take another large slice out of growth. In a scenario directly opposite to pre-...