And I Thought Greece Was The Broken Link

It turns out it all goes down the tubes on Cyprus of all places.

And really, let’s be honest, no one would have guessed Cyprus if you’d ask them last year. Everyone and their brother would have put the end of the Eurozone due to Greece, Spain or possibly even Italy.

But not Cyprus.

And now the EC is going to screw this up even more, which is truly impressive if you think about it.

From the FT: “a revised deal being discussed in Nicosia, with the blessing of the European Commission, would shift more of the burden on to deposits larger than €100,000, according to officials involved in the talks. Under a controversial deal struck with international bailout lenders in the early hours on Saturday, a 6.75 per cent levy would be imposed on all deposits under €100,000 while accounts over that threshold would be hit with a 9.9 per cent levy. The depositor levy was demanded by a German-led group of creditor countries to bring down the bailout’s price tag from €17bn…. Officials involved in last night’s talks said the changes in the levy’s rates were in flux, but they could see the higher rate increase to as much as 12.5 per cent while the smaller deposits could be about 3.5 per cent.”

Ah yes, let’s back up a step.

It was announced over the weekend that as part of getting “saved” by the EC, Cyprus would get some cash. Oh and they would have to go back on their promise of making depositors whole by “taxing”, ie stealing, various amounts depending on the amount in the bank at the time.

As various pundits here in the US have said, the markets don’t like uncertainty. So that is exactly what the geniuses in Brussels have decided to do.

They’ve bolloxed the situation by showing that no depositor is safe in the EU. No one. Not anywhere. They claimed this is a one time emergency but really, when it comes to money grubbing pols, there’s never just one time. There’s just the first time.

And to make things worse, after rightfully getting pummeled this way to next Tuesday, it seems they’re going to adjust the amount they take. Please don’t. Now you’re just going to confuse the situation. It’s a bad situation. I’m amazed that they’re going to make it worse by muddling what’s going on by changing how much they steal.

Really, these guys in the EC make the keystone cops and the Washington Generals look world class. Can’t wait to see the flight to treasuries and how everyone leaps out of the Euro. At least it’ll make Monday interesting.

Yeah, It’s The Rating Agencies Fault

That’s the ticket.

“Yesterday’s decisions by one rating agency do not provide more clarity. They rather add another speculative element to the situation,” Barroso told reporters, adding that the agencies were not immune to “mistakes and exaggerations.””It seems strange that there is not a single rating agency coming from Europe.

It shows there may be some bias in the markets when it comes to the evaluation of the specific issues of Europe,” he said, stating publicly a view that many senior EU officials have pushed privately for some time.

I almost, and I mean almost, feel bad for the ratings guys. They blew it on housing and are now trying to make it up by being tough on bad government debt and they’re still getting hammered. A no win situation. I guess they didn’t spend enough lobbying money on buying up enough European MP’s so they don’t get criticized. They certainly spent enough on buying American pols.

So Far The Market Likes It

So far the Street likes what it sees.

Stocks rocketed higher and bond prices fell Monday after investors were reassured by a nearly $1 trillion plan to avoid a European debt crisis.

The Dow Jones industrial average rose about 390 points. The Dow and broader stock indexes rose more than 3 percent. Markets also barreled higher in Europe.

At this point it’s up 414 and change. We’ll see whether this will last thru the day and how the market closes. If the Europeans were trying to goose the market, they’ve certainly done that and more. We’ll see whether it really fixes the underlying problems.

And The Americans Get Involved Saving The Euro

The Fed has decided it too wants in on saving the Euro.

The U.S. Federal Reserve will restart its emergency currency-swap tool by providing as many dollars as needed to European central banks to keep the continent’s sovereign-debt crisis from spreading.

The swaps with the European Central Bank, Bank of England and Swiss central bank will allow them to provide the “full allotment” of U.S. dollars as needed, the Fed said late yesterday in a statement in Washington.

Not sure if it’ll all help, but it’s obvious that everyone thinks there’s a problem in Europe. Of course they are again not fixing the underlying problems…

The Mother Of All Bailouts:European Edition

Well well well, not only did the EU get its act together, but they were able to get something out the door to help reassure people that the Euro is a good place to park your cash.

European Union finance ministers moved toward agreement on an unprecedented loan package worth at least $645 billion to prevent Greece’s fiscal woes from triggering a broader sovereign-debt crisis and shattering confidence in the euro.

Jolted into action by last week’s slide in the currency to a 14-month low and soaring bond yields in Portugal and Spain, the 16 euro governments sketched out plans to make 440 billion euros ($570 billion) available, with 60 billion euros more from the EU’s budget

Of course they still have some arm twisting to do before they’ll have used all the bullets of government manipulation.

Government officials said they won’t push the independent ECB to, for example, buy government bonds. President Jean-Claude Trichet accelerated the market selloff on May 6 by rejecting that measure.

I’m sure they’ll try their hardest to get some quantative easing going on from the ECB side.

Obama yesterday emphasized “the importance of the members of the European Union taking resolute steps to build confidence in the markets,” White House spokesman Bill Burton told reporters in Hampton, Virginia.

Of course they haven’t done anything about the underlying problems, just punted that issue down the road like the American administration. All they’ve done is put one hell of a bandaid on the patient hoping it won’t die as the head lies on the road. And it’s obvious that the public in Europe is enamored of bailouts there as they are here in the States.

Voters in Germany’s most populous state dealt Chancellor Angela Merkel a painful setback Sunday, erasing her government’s majority in the upper house of parliament and curbing its power after a stumbling start and criticism over the Greek debt crisis.
…”This is of course a warning shot for the governing parties, and the people should know that it has been heard,” said Foreign Minister Guido Westerwelle, the vice chancellor and leader of the Free Democrats, Merkel’s junior coalition partner. “We must make an effort to win back lost trust.”

Well, color me skeptical about any politician actually doing what they say. I think the thing to take away is that the pols of Europe are scared of the downside and are willing to do anything thing possible to save their asses without actually fixing the problems they have. In other words, they are acting like typical politicians and their countries will be the worse for it. But we’ll see.