Dangerous Merkel-Sarkozy Spin

Interesting read by some traders on the Merkel/Sarkozy nonevent.   Their take away is both leaders sent a message to the PIIGS to either get on board with fiscal adjustment or leave the Euro.

Hmmmm.    Now what would that do to each country’s stock of debt denominated in Euros?   Would their bank and bond creditors take Greek drachmas and Irish punts as payment?    If some of these countries left the Euro and went back to home currencies their debt to GDP ratios would freaking skyrocket!

Dangerous stuff being kicked around at a dangerous time.   Our sense is both leaders were relieved by the success of ECB intervention to bring down Spanish and Italian bond spreads and they will continue to rely on Trichet’s monetary bazooka to fend off the wolves.  Bonne Chance!

This entry was posted in Black Swan Watch, Monetary Policy, PIIGS and tagged , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.