13.12.2011

By Simon Miller

Markets have opened flat this morning as traders price in the lack of a substantial rescue package for the eurozone.

All major indices share unease after yet another summit passed without a resolution to clear the debt and surplus problems that dog the eurozone.

The FTSE 100 was trading slightly up at 5,431.67
(09.41GMT) after closing down at 5427.86 while the CAC 40 was down 4.12 at 3,085.47 after closing at 3089.59. The S&P 500 closed down 18.72 at 1,236.47.

The outcome of the Euro-summit continues to rumble on with the UK coalition government facing its most serious split since the 2010 election with deputy prime minister Nick Clegg claming that the UK's decision to walk away from the agreement made the country a "pigmy in the world".

The prime minister David Cameron faced the Commons yesterday without his deputy on the front bench and told MPs that the decision to walk away was made in the "best interest of the country".

Rehoteric was racheted up in Europe following the summit with Olli Rehn, the EU's economic affairs commissioner warning that: "If [UK's] move was intended to prevent bankers and financial corporations of the City from being regulated, that's not going to happen."

He added: "We must all draw the lessons from the ongoing crisis and help to solve it and this goes for the financial sector as well."

European leaders face another dilemma as rating agencies Standard & Poor's and Moody's warned that all euroezone countries still faced a potential downgrade to their sovereign rating.

Moody's was of the opinion that the new pact was no different to previous agreements while Standard & Poor's warned that only a systemic failure of another bank would spur the eurozone into a proper resolution.

In a note yesterday, Moody's wrote: "They therefore do not change Moody's previously expressed view that the crisis is in a critical and volatile stage, with sovereign and bank debt markets prone to acute dislocation which policymakers will find increasingly hard to contain.

It continued: "While Moody's central scenario remains that the euro area will be preserved without further widespread defaults, the shocks that are likely to materialise even under this 'positive' scenario carry negative rating implications in the coming months."

S&P chief economist Jean-Michel Six commented: "There is probably yet another shock required before everyone in Europe reads from the same page, for instance a major German bank experiencing difficulties in the market. Then there would be a recognition that everyone is on the same boat and even German institutions can be affected by this contagion."