Debt Crisis To Be Focus Next Month

Policy makers have 15 days in September to cement solutions.

European policy makers end August with 15 days to justify bondholder optimism that they can deliver lasting solutions to the debt turmoil.

September offers a microcosm of three years of crisis-fighting. The next two weeks may feature fresh anti-contagion measures from the European Central Bank, a possible aid request from Spain and insight into whether creditors will ease Greece’s bailout terms. German judges and Dutch voters also get to proclaim on the euro’s future.

Steering Yields

While speculation has mounted the central bank may try to cap bond yields outright, Goldman Sachs Group Inc. economist Huw Pill predicts it will avoid explicit targets for rates or spreads and instead try to steer market yields within wider bands depending on economic performance.

ECB Faith

Economists at Citigroup Inc. are less confident, saying last week they view a Greek departure in the next six months as “increasingly likely” and possible as soon as next month should the troika decide the government hasn’t done enough. A decision on whether Greece needs more aid may still not come before October, Luxembourg Prime Minister Jean-Claude Juncker said last week.

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