Sunday, May 9, 2010

Greek Bailout Plan Increased by Factor of Five

We are back to 2008... it's Sunday night, so that means someone is getting bailed out. After agreeing to a bailout just a week ago of some $160Bish, European and IMF (read: US) officials have taken the stakes to the stratosphere with a proposed $800B bailout. Now we're talking real money. Obviously Bernanke was called in to teach 'em how to do it right... this is a statement to the bond vigilantes that yes we can fight a debt crisis with even more debt, U.S. style. Much like the US ring fenced its financial oligarchs, the Europeans are attempting to ring fence their debt laden brothers in arms. Now all the Europeans need to do is allow their central bank to buy government debt and every major region in the world with be monetizing debt (i.e. stealth defaults) - got gold?

As we saw with almost every bailout for the past 2+ years, as long as the can is kicked down the road, short sighted speculators will be giddy and are bidding futures up in gleeful benevolence. Rinse. Wash. Repeat. Yawn.

Via Reuters:
  • European Union finance ministers on Sunday promised to counter the "wolfpack" of the financial markets as they sought agreement on a 600 billion euro ($805 billion) plan to keep Greece's debt crisis from spreading.
  • The compromise measure under discussion included loan guarantees by euro zone countries worth 440 billion euros, a 60 billion euro stabilization fund and a 100 billion euro top-up of International Monetary Fund loans, EU sources said.
  • The safety net being assembled was meant to protect other countries with bloated budgets, such as Portugal, Spain and Ireland.
  • Economists estimate that if Portugal, Ireland and Spain -- three other heavily indebted euro zone countries -- eventually come to require bailouts similar to Greece's, the total cost could be some 500 billion euros.
  • Moving swiftly to bolster Greece and instill some confidence in shaky markets, the IMF approved a 30 billion euro rescue loan as part of a broader combined EU-IMF bailout for the country totaling 110 billion euros.
  • "We now see ... wolfpack behaviors, and if we will not stop these packs, even if it is self-inflicted weakness, they will tear the weaker countries apart," Swedish Finance Minister Anders Borg told reporters in Brussels as he arrived for the EU meeting.
  • U.S. President Barack Obama and German Chancellor Angela Merkel spoke by phone earlier on Sunday about the importance of EU members acting to build confidence in markets.
  • Hopes the EU package would successfully tackle the crisis helped lift the euro, which gained almost 2 percent against the U.S. dollar and 3 percent on the yen in early Asia trade. U.S. stock futures also surged at the start of trade on Sunday.

Kick the can Sam.
  • " the measures taken before -- for the benefit of Greece -- a stabilization fund is just buying time for distressed borrowers," it said.

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