By Marcus Leach

Monday saw the latest in joint meetings between the German Chancellor and the French President, building on last month’s agreement for budgetary discipline.

Following the joint press conference, analysts from Caxton FX commented that the united front being shown by the two leaders is welcome and absolutely crucial if the eurozone is going to escape from this crisis.

Nonetheless, while tighter fiscal restraint is a long-term measure to avoid further sovereign debt crises, it does little in the short-term to bring down the elevated borrowing costs we are seeing throughout the eurozone at present.

Richard Driver, analyst for Caxton FX, said that a further narrative to this story is that the Greek issue is in dire need of progress.

“Merkel reiterated today that the second bailout won’t come until there is an agreement on private bondholder haircuts, however, these negotiations could go on forever," he said.

“The chances are this Greek tragedy will go right down to the wire and it will be a case of who blinks first.

“A Greek default beckons if the next tranche of aid under the first Greek bailout isn’t released, so the pressure is really going to intensify in the next few weeks.

“The next Summit on 30 January is the main item on the calendar but we are not optimistic that a magic formula will be produced, we’ve been disappointed time and time again by these meetings.”

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