Europe's deal gives RBA good reason to sit tight

A E10 billion ($12.3bn) boost of capital for the European Investment Bank, expected to raise overall lending capacity by E60bn.

Targeting E60bn of unused structural funds to help small enterprises and create youth employment.

A pilot launch of EU project bonds worth E4.5bn for infrastructure improvements, focusing on energy, transport and broadband.

Crucially, the eurozone leaders have agreed to use the eurozone's planned bailout fund to directly support struggling banks, without adding to government debt.

After many hours of talks, they also agreed to set up a joint banking supervisory body for the eurozone.

There is now the prospect that in the longer term there may be a eurozone-wide fiscal authority with teeth and euro bonds, relegating national bonds to the status of state bonds in thoroughly federated nations.

I remain doubtful that cultural differences will ever allow a fully functioning eurozone federation, or indeed that such a solution is desirable, even on narrowly economic terms. But I am relieved that the eurozone leaders have finally shown the ability to reach the sort of sensible compromises required in any democratic nation, because this removes the possibility of deadlock leading to unpredictable economic meltdown.

Time has been brought, and the RBA is entitled to sit and watch how the current, more hopeful, situation plays out.

The general point is that the eurozone crisis has a long way to go yet, and China and the US are growing more slowly than we are used to seeing.

Perhaps this is the new condition for us all, and it would not be all bad if it was.