Bailout Threatens to Eat Southern Europe Alive While Funding Curves Are Comatose

I don’t know about you but I’m getting tired of this:

Europe’s worsening debt crisis is intensifying pressure on policy makers to widen a bailout package beyond Greece after a cut in the nation’s rating to junk drove up borrowing costs from Italy to Portugal and Ireland.

As German Chancellor Angela Merkel delays approval of a 45 billion-euro ($59 billion) Greek rescue, the crisis is spreading. Portugal’s benchmark stock index yesterday fell the most since the aftermath of Lehman Brothers Holdings Inc.’s collapse, while the extra yield that investors demand to hold Italian and Irish debt over bunds rose to a 10-month high.

via Greek Debt Contagion Presses EU to Broaden Bailout – Bloomberg.

Day by day, week by week, month by month this crisis has gotten worse.  Some people think the answer is more money, bigger bailouts:

“Policy makers need to get ahead of the curve,” Eric Fine, who manages Van’s Eck’s G-175 Strategies emerging-market hedge fund. “This is no longer a problem about Greece or Portugal, but about the euro system.”

And this:

“What is missing in Europe is an authority that can back sovereigns through a crisis,” James Nixon, co-chief European economist at Societe Generale SA in London. “We desperately need this.”

That misses the point.  It’s not bigger and bigger commitments to save the drowning Greeks that are needed.  It’s finality.  Finality can only come in one form: a boot out of the Eurozone and a default that serves as a springboard for a debt restructuring and significant privatization of government services and bureaus.

We have gotten everything but finality.  We’ve gotten commitments of solidarity. Promises of funding mechanisms.  Threats of cracking down on speculators.  Blah blah blah, yadda yadda yadda.  It’s been nothing but talk as the European leaders only strategy has been to jawbone and cajole the Euro higher.

That hasn’t worked:

The gap from two weeks ago has been filled and then some.  Euro pressure continues to show itself on a daily basis, because, as the Bloomberg article put it:

“The biggest risk now is that the market speculates against every single indebted peripheral country, and that could lead to a sovereign debt crisis,” said Axel Botte, a fixed- income strategist at AXA Investment Managers in Paris. “The contagion risk is real.”

And it’s getting bigger every day this situation languishes.

Meanwhile, the banking system sleeps:

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1 Comment

Filed under finance, government, International, macro, Markets, risk management, Way Forward, You're kidding

One response to “Bailout Threatens to Eat Southern Europe Alive While Funding Curves Are Comatose

  1. Pingback: The Real Action Is In The Funding Curves « Deep Thoughts by Professor Pinch

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