All eyes are on Europe: And I am not talking about the wide, wide world of sports. It seems that the European financial situation has “worsened” as the Spanish yields exploded on Friday sending the Euro stock markets into a sizable selloff. Remember the outcome of the June 29-30 meeting of the Euro policymakers? All the EUROCRATS were celebrating the victory of PRIME MINISTERS RAJOY AND MONTI‘s victory over the IRON CHANCELLOR, Frau Merkel. It now seems that the victory was PYRRHIC as the markets are now testing the resolve of the ECB, EU FIN MINS and, ultimately, the IMF. As with any TROIKA, if all the horses are not pulling together the wagon is very unstable.
AS SPANISH TEN YEAR NOTES SETTLED ABOVE 7.25% the markets have become very nervous about the stability of the SPANISH BANKING SYSTEM WHICH IS TIED TO THE DETERIORATING FISCAL SITUATION. NOTES HAS WARNED FOR THE LAST TWO YEARS THAT THE SPANISH SITUATION WAS FAR WORSE THAN ITALY. There were several articles over the weekend about how Spain was being crushed by the EURO AUSTERITY DEMANDS. Yes TRICHET, there are ADVERSE FEEDBACK LOOPS.
The best of the articles was by AMBROSE EVANS -PRITCHARD in the London Telegraph, “Blaming the Spanish Victim as Europe Spirals into Summer Crisis.” As usual, Mr. Pritchard captures the essence of the present situation as reveals the lack of any innocents in Europe’s crisis. The interesting thing about the weekend news from Spain is that it is coupled with articles about Greece and how dire the present situation is AGAIN.
In a widely circulated story, Germany’s Economic Minister, ROESLER, is quoted as being “very skeptical” that Greece can be rescued. Roesler is perturbed that Greece “can’t fulfil its conditions of agreement–no more money”. Also, Reuters reported that the ECB won’t accept Greek marketable securities and other collateral used by Greek banks to attain ECB funding.
It seems that enough of the Euro banks’ exposure to Greek debt has been alleviated that EUROCRATS are willing to cut Greece away so that all attention can be focused on Spain. The table is being set for a major financial package to attempt to avert a EUROPEAN CRASH so as the week begins be attentive to all the indicators that monitor European DEBT. It seems that the EUROPEAN FINANCIAL SITUATION IS LIKE THE WORLD OF SPORTS: EXPERIENCING THE THRILL OF VICTORY AND THE AGONY OF DEFEAT ON A REGULAR BASIS. Let the GAMES BEGIN.
Tags: adverse feedback loops, Ambrose Evans-Pritchard, ECB, EU, IMF, Merkel, Monti, Rajoy, Spanish 10-yr notes, Trichet, Troika
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