But S&P warns: deliver or else.

As first predicted here on November 27th, the banks-bondholders-lenders were formally given their Get out of Jail Free card this morning, when Chancellor Merkel and Nicolas Sarkozy agreed not to force private sector bondholders to take losses on any future eurozone bail-outs. This means that the Elysee gets what it wanted – freedom from haircuts that would destroy the French banking system – but Wolfgang Schauble only gets half of it: he had secretly wanted to give all the ClubMeds a disguised forgiveness via the IMF, ECB and EU taxpayers. Clearly, as always the banks come first.

This leaves a great many questions unanswered: did the Elysee stitch Schauble up, by using him as a route to Merkel, and then dump on his forgiveness idea? Does this now mean all the banks will sign up for strict regulation inside the EU? Will the markets now leave their dogs quiet after getting  what they want? What is Wolfie up to now? And biggest one of the lot, will Berlin move at all on the question of several debt responsibility via a eurobond before official Fiskalunion?

The answer to the last one is, sadly, the only near-certainty: NO. And that in turn may well mean the markets will (following this brief truce) unleash their bloodhounds again.

Oh…and, um yes….France and Germany have reached a “comprehensive” agreement on new fiscal rules for the eurozone. Hardly what you’d call a breakthrough – but enough for the increasingly europhile FT to banner-headline it on today’s front page. Unbelievable.

I posted yesterday to list the ten things that might screw up this week’s summitry. S&P’s decision to issue credit rating warnings to nearly everyone involved has already happened. The problem with this is that a downgrade would make debtor countries’ borrowing costs rise further and faster, but Chancellor Merkel waved a hand dismissively, saying, “What a ratings agency does is its own responsibility.” That’s right Geli, they did it just to annoy you. However, waved hand or not, another dud on Friday really isn’t going to get France and Germany out of their self-dug hole.