There is one monstrous fact stalking Europe and no amount of debating will make it go away – there isn’t enough money to make the bank bail-out’s work.
There isn’t enough money in Europe’s bail out fund, the EFSF, despite this morning’s vote in the German parliament. The vote this morning was to ‘increase’ the EFSF not to what the banks and the Americans have already insisted it will need (read – what they want) – more than a trillion euros – but to what was ‘agreed’ some while ago and had to then be ratified by member states. The mainstream financial news outlets seem keen to give the impression that what was voted for in Germany was ‘it’, the final fix, the super-EFSF. This is NOT the case. What was agreed to in Germany is what Geithner and others had already said was woefully insufficient. That is why the vote has not heralded a massive rally in Europe or America. There has been a muted increase on exchanges because today’s vote is a step towards the Uber plan.
That plan will see the EFSF working with the ECB to create what amounts to a vast CDO (Collateralized Debt Obligation). This ‘CDO’, which the banks and the Fed want so badly, will be a supra-national version of the CDOs which brought us to this state in the first place. What I think would happen, is Greece would be forced to put up assets as collateral. These could be parts of Greece and its infrastructure and/or the income from them, and future tax receipts as well I imagine. This ‘income stream’ will be the promise written on new bonds/debt which the CDO will sell to investors. Those ‘investors’ will probably be the central banks and even the self same insolvent private banks who are being bailed out in Europe and beyond.