Greece: 'We don't need no stinkin' restructuring'

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machinehead's picture
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Greece: 'We don't need no stinkin' restructuring'

After S&P said last week that they might receive only 30 to 50 cents on the dollar, Greek bondholders might be relieved by the latest news about the bailout. But should they be?

Amadeu Altafaj, a spokesman for Olli Rehn, the European Union’s monetary affairs commissioner, said European officials were engaged in what he described as “fire brigading” to ensure stability “on the Greek front.” There would be “no restructuring of the debt,” he said. That’s “not even part of the debate in Athens.”

He insisted that no discussions were taking place about whether other euro zone countries could have access to similar financial aid if needed. In recent days debt markets have come under pressure in Portugal and Spain.

http://www.nytimes.com/2010/05/01/business/global/01euro.html?hpw

Oh boy, talk about hubris (ancient Greek ὕβρις) -- no restructuring! And no aid for Portugal and Spain, already downgraded and under market attack! Hear no evil, see no evil, speak no evil! Once again, the EU seems to be a day late and a euro short, getting a grip on a previous iteration of the crisis after it has already escalated to a new and more virulent stage.

Here is what Mr. Amadeu Altafaj may be unable to sweep under the EU's capacious rug:

In Athens, where the prospect of a rescue has been greeted with a mix of relief and wounded pride, central bank data showed that business and household deposits at Greek banks fell for a third month in March, bringing total losses in the first quarter to 10.6 billion euros. Moody's downgraded its credit ratings on nine Greek banks on Friday.

Platon Monokroussos, an economist at EFG Eurobank, the nation’s second-largest bank after the National Bank of Greece said speculation that austerity measures would include new taxes on savings had caused some wealthy Greeks to move their funds to foreign banks and Cypriot units of Greek banks. But he said he expected the rescue package to calm fears and prevent a flight of funds.

Earlier in the week, the finance minister, George Papaconstantinou, told Mega TV that the Greek government had pledged to guarantee deposits at banks. But some businesspeople said the credit squeeze was growing worse.

Konstantinos Michalos, president of the Athens Chamber of Commerce and the owner of a company exporting latex products, said businesses were being deprived of much-needed liquidity. He said his group’s members were complaining that some foreign banks were refusing to accept credit guarantees from Greek banks, citing the economic instability. As more Greeks in rural areas took their deposits out of banks and put their savings under their mattresses, he said, home burglaries were on the rise.

The ugly fact is that without a haircut on existing debt, a bailout will only push Greece deeper into a hole. Slamming on the fiscal brakes with tax hikes and spending cuts will push the Greek economy into deep recession, increasing the financial stress. Something has to give. Greece is saying the euro currency peg is solid. The EU says it will keep funding Greece's hopelessly indebted state at 'reasonable' interest rates. But a bank run can move a lot faster than Europe's bumbling, arrogant authorities.

I'm going out on a limb here, but I think that without grasping the bull by the horns and restructuring Greece's debt, the current bailout proposal is Dead on Arrival. Markets are going to sabotage the arrogant, deluded fantasy of Europe's mandarins by pulling the plug on Greek bank deposits, share prices and the market price of Greek debt.

Restructure us now, or restructure us later! (Got gold?)

 

 

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Re: Greece: 'We don't need no stinkin' restructuring'

Hmmm buy Greek government bonds and get 25% return!!!!  Sounds better than my money market 1%.....NOT!! but they will sucker some seasoned citizen widows on fixed incomes in on that return.

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Re: Greece: 'We don't need no stinkin' restructuring'

Thick limb! I think the European banks are laden with Greek trash. Should be quite a show.

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Re: Greece: 'We don't need no stinkin' restructuring'

Shariah law indicates that a woman who is raped has two options:  marry her rapist or submit to death for having sex outside of marriage.

This is the choice being given to Greece.  

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Re: Greece: 'We don't need no stinkin' restructuring'

As Ellen Brown would say..."caught in the web of debt."  The exponential growth of interest debt is a killer.  Nothing new here, third world countries have been looted the same way for decades. 

This is a very old scam run by the international banking cartel.  Get nations into perpetual debt and then take their assets and resources in a big payday.  Greece, like Portugal, Spain, the UK, etc., will be told to take severe austerity measures that reduce wages, health care benefits, education, retirement expectations while increasing taxes.

Hopefully one or more of these countries will tell the IMF and their masters to go to hell and issue their own debt free money. 

Larry

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Re: Greece: 'We don't need no stinkin' restructuring'

What if, by some miracle, the EU and IMF are able to prop up the Greek state for three years by brute force, without restructuring? After the brutal recession induced by the austerity program, Greek GDP might be 10% smaller in 2013 than today. But its debt likely will be 30% higher -- a hopeless burden.

How could debt keep expanding, when Greece is pledging to slash its deficit by up to 10% of GDP? Frankly, such drastic cuts are unlikely to materialise. As the economy plunges and unemployment soars, emergency social aid will offset much of the spending cuts. And if it doesn't, riots in the streets would install a new government which will implement such social aid.

But here's a more direct way in which the deficit cuts may be illusory. The IMF estimated that the UK spent 20% of GDP bailing out its banking sector. Greek banks are already experiencing rating downgrades and deposit outflows. Economic recession will accelerate their losses and writeoffs. A bailout of the Greek banking sector could easily consume all of the projected fiscal savings.

European authorities face an exquisite dilemma. Staving off restructuring now only means a bigger, uglier default down the road. But, admitting the obvious and haircutting debt now sets a precedent, creates a moral hazard, and undermines the very foundation of the euro currency. That is, a Greek default opens a Pandora's box.

As Simon and Garfunkle used to sing, 'Any way you look at it, you lose.' Well, unless you own gold, Mrs. Robinson. Wink

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Re: Greece: 'We don't need no stinkin' restructuring'
land2341 wrote:

Shariah law indicates that a woman who is raped has two options:  marry her rapist or submit to death for having sex outside of marriage.

This is the choice being given to Greece.  

It's more like statuatory rape, with the added qualifier that Greece flirted with disaster, beforehand.

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Re: Greece: 'We don't need no stinkin' restructuring'

Greece's Finance Minister essentially confirms my speculation above, that Greece's economy could shrink up to 10 percent:

Indicating that the steps would undermine economic growth, Mr. Papaconstantinou forecast a deeper than expected recession of 4 per cent for 2010, and 2.6 percent in 2011, before the economy returned to growth of 1.1 percent in 2012. “We will be in recession for the next few years which means that we have to run faster to reduce the deficit,” he said.

He said that Greece would make budget cuts of €30 billion, or $40 billion, to reduce the budget deficit to below 3 per cent by 2014 [from 13.6 percent in 2009].

http://www.nytimes.com/2010/05/03/business/global/03drachma.html?hp

Just now I prepared a simple spreadsheet using Mr. Papaconstantinou's projections, and assuming that the deficit (as a percent of GDP) declines linearly from 2009 to 2014. If anything, these are quite optimistic assumptions.

The result: by 2014, Greece's economy is actually slightly smaller than today, by a fraction of a percent. But the debt has escalated from €300 billion to €425 billion, an increase of 42 percent.

If Greece can't manage its debt now, how is it going to make payments on a debt that's 42 percent larger, weighing on a weak economy that hasn't grown?

Meanwhile, the 'experts' quoted in the article above deny that restructuring is a possibility. Sooner or later, I say, it's not a possibility, but rather a dead-on CERTAINTY.

What we have here is a classical face-saving fudge, euro-continental-style. But these numbers do not compute. They fought the law [of compounding], and THE LAW WON !!!

 

 

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Re: Greece: 'We don't need no stinkin' restructuring'

In a Sunday afternoon announcement, the Greek finance minister confirms the conclusion of my spreadsheet:

Papaconstantinou said Greece's public debt would soar to nearly 150 percent of GDP -- a higher peak than forecast earlier -- but start falling from 2014. Athens would return to commercial borrowing when "appropriate," he added.

http://www.nytimes.com/reuters/2010/05/02/business/business-us-eurozone....

I repeat my silly question: if Greece can't service its debt now, how is the same size economy going to service a 40% larger debt in 2014? I sure won't be buying any 10-year Greek debt! The question is, what will other investors do? There's a delicate timing issue here:

Diplomats said they expected the emergency funding to be unblocked by the second half of the following week, beginning May 10. Athens has to repay 8.5 billion euros of debt on May 19.A fund backed by the IMF and EU would be set up to help Greek banks.

Moreover, the required unanimous approvals by European governments aren't even certain, with opposition to the bailout still strong among the German public. And the fund to help Greek banks -- will it be available, like, tomorrow?

I could be all wrong, but I don't think the market is going to like this deal, despite its larger size. And I doubt that it assuages the growing unease about Spain and Portugal.

 

 

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Re: Greece: 'We don't need no stinkin' restructuring'

I'm sure if it came to a direct vote, the results would be similar to Iceland's vote.  That would put a huge nail in the coffin of the banksters, so I don't see their government letting that happen.

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Re: Greece: 'We don't need no stinkin' restructuring'

The current BBC 'Newshour' brodcast has an interesting lead on the Greek bailout:

http://www.bbc.co.uk/worldservice/   (click on the link mid-page, left side to listen)

The second commentator suggests the austerity plan can't work (it will crush the economy making repayment impossible) and that its just a fig leaf to buy a little more time. Kind of seems to be a regular theme these days in government policy - lets see if we can buy just a little more time.

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Re: Greece: 'We don't need no stinkin' restructuring'

Monday morning market reactions:

The yield on the Greek two-year note slid 216 basis points to 11.41 percent at 10:30 a.m. in London.

The EU package failed to lift Portuguese and Spanish bonds. The yield on Portugal’s 10-year bond rose 2 basis points to 5.29 percent while Spain’s advanced 2 basis points to 4.08 percent.

http://www.bloomberg.com/apps/news?pid=20601009&sid=aJU7oabu1jX4

The European Stoxx 50 index is down 0.6%, while gold and crude oil are both up more than 0.2%.

Hardly a ringing endorsement -- a successful bailout typically produces a monster rally in stocks. A double-digit rate on two-year notes is still a crisis level. Today's damp squib reaction feels more like a freeze frame in a train wreck movie.

 

 

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Re: Greece: 'We don't need no stinkin' restructuring'

The NY Times features a skeptical article this morning about the Greek bailout. Excerpts:

Thomas Piketty, the founder of the Paris School of Economics and a professor there, thinks that the demands on Greece, driven by a market frenzy, are simply too high.

“Austerity can be justified, but 8 percent interest rates on a debt that amounts to more than 100 percent of gross domestic product is just crazy,” he said. “They will have to restore their public finances and then pay back this huge debt at the same time — and Greek debt amounts to so little when you compare it to what was needed to bail out the banks” last year.

“Not only is this not going to help growth, it’s going to end very badly, politically speaking,” Mr. Piketty said, referring to Greece. “Taxpayers cannot accept this in the long run.” Standard & Poor’s suggested last week that the euro value of Greece’s gross domestic product may not return to last year’s level until 2017.

Greece is functionally bankrupt, Ms. Barysch said. “For most European officials and experts, it’s not about fostering Greek growth, it’s about the stability of the euro zone.”

http://www.nytimes.com/2010/05/03/world/europe/03austerity.html?hp

And there you have it -- the bailout is not about 'saving Greece.' It's to save French and German banks stuffed with Greek debt, and preserve the credibility of the euro. Greece is just a passive duck, about to have more debt stuffed down its throat to make pâté.

The late Murray Rothbard made the case for repudiating sovereign debt as follows:

Public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future. This is the opposite of a free market, or a genuinely voluntary transaction. Both parties are immorally contracting to participate in the violation of the property rights of citizens in the future. Both parties, therefore, are making agreements about other people's property, and both deserve the back of our hand.

http://www.lewrockwell.com/rothbard/rothbard190.html

How do you spell relief? D-E-F-A-U-L-T.

 

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Re: Greece: 'We don't need no stinkin' restructuring'

These flipping morons have to be tripping on acid: 135% debt:GED caused a debt crisis so 150% debt:GDP is going to fix it? The precedent has been set, next up Portugal, Spain & Italy. Then the US.

Every Fiat currency is now a marked man. 

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Re: Greece: 'We don't need no stinkin' restructuring'

One more to the mix. Greece will default. More on Goldman Sachs.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/5/1_Bi...

 

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Re: Greece: 'We don't need no stinkin' restructuring'

These flipping morons have to be tripping on acid: 135% debt:GED caused a debt crisis so 150% debt:GDP is going to fix it? The precedent has been set, next up Portugal, Spain & Italy. Then the US.

Every Fiat currency is now a marked man. 

LOL Davos.....drugs do the darnest things....

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Re: Greece: 'We don't need no stinkin' restructuring'

Tuesday morning ... Bloomberg reports:

The euro weakened on growing concern that the Greek bailout won’t end Europe’s debt crisis. The Stoxx Europe 600 index slumped 0.9 percent as all 18 western European markets declined apart from Denmark. Spain’s IBEX 35 tumbled 2.8 percent.

Greek bonds fell for the first time in four days, with the yield on the government’s 10-year bond rising 5 basis points to 9 percent. Investors demanded an extra 550 basis points to hold Greek 10-year bonds instead of benchmark German bunds, up from 544 basis points yesterday. Credit-default swaps on Greek debt rose 28.5 basis points to 675, according to CMA DataVision prices.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a__80.nt0Md8&pos=1

The bailout is not working. Europe has a permanent 'deconvergence trade' on its hands, with southern Europe facing higher yields and credit spreads. This spells doom for the euro, because the ECB can't continue stuffing its balance sheet with sovereign junk bonds -- as it's already agreed to do in the special case of Greece.

Although the German public seems to regard it as a gift, the proposed bailout in fact is a hopeless attempt to squeeze blood from a stone in order to indirectly bail out French and German banks. Bad idea! Greece should restructure and devalue, while France and Germany recapitalise their banks directly, at lower cost than a failed Greek bailout.

An alternate solution (you heard it here first) would be for Germany to leave the euro and go back on the Deutschmark. Without its anti-inflationary industrial heartland, the euro would devalue, acquiring more of a 'Club Med' tone to the short-term benefit of its southern members, including Portugal, Spain, Italy and Greece.

In any case, conventional thinking on a gargantuan scale will only produce a more spectacular train wreck. Mr. Trichet -- you're the Greenspan of Europe! And that ain't a compliment, dude.

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Re: Greece: 'We don't need no stinkin' restructuring'

Here's some more 'out of the box' thinking on Greece:

'Greece can successfully issue and place new debt at low interest rates. The trick is to insert a provision stating that in the event of default, the bearer on demand can use those defaulted securities to pay Greek government taxes. This makes it immediately obvious to investors that those new securities are ‘money good’ and will ultimately redeem for face value for as long as the Greek government levies and enforces taxes. This would not only allow Greece to fund itself at low interest rates, but it would also serve as an example for the rest of the euro zone, and thereby ease the funding pressures on the entire region.'

http://www.nakedcapitalism.com/

 

 

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Re: Greece: 'We don't need no stinkin' restructuring'

This morning a Bloomberg article states that 'Greek bond yields yesterday rose above their level before euro-area leaders agreed on the bailout on May 2.' Yet, again quoting Bloomberg, investors worry that 'rescues similar to Greece’s 110 billion-euro ($143 billion) package will be needed in Spain and Portugal.'

HUH? The rescue failed, so the failed plan should be extended to other countries too?

We hear a lot of talk about political extremism. But fiat currency constitutes an extremist secular religion. Its brainwashed adherents exult that governments 'face no revenue constraint,' meaning that they can print the currency to service debt if tax collections don't suffice.

But markets have started to see through the money illusion. The abstract quantity of interest on debt has compounded beyond the ability of the bricks-and-mortar, flesh-and-blood economy to service it. More debt is no longer the answer.

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Re: Greece: 'We don't need no stinkin' restructuring'
machinehead wrote:

This morning a Bloomberg article states that 'Greek bond yields yesterday rose above their level before euro-area leaders agreed on the bailout on May 2.' Yet, again quoting Bloomberg, investors worry that 'rescues similar to Greece’s 110 billion-euro ($143 billion) package will be needed in Spain and Portugal.'

HUH? The rescue failed, so the failed plan should be extended to other countries too?

We hear a lot of talk about political extremism. But fiat currency constitutes an extremist secular religion. Its brainwashed adherents exult that governments 'face no revenue constraint,' meaning that they can print the currency to service debt if tax collections don't suffice.

But markets have started to see through the money illusion. The abstract quantity of interest on debt has compounded beyond the ability of the bricks-and-mortar, flesh-and-blood economy to service it. More debt is no longer the answer.

Great commenting!!!!!

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Re: Greece: 'We don't need no stinkin' restructuring'
machinehead wrote:

This morning a Bloomberg article states that 'Greek bond yields yesterday rose above their level before euro-area leaders agreed on the bailout on May 2.' Yet, again quoting Bloomberg, investors worry that 'rescues similar to Greece’s 110 billion-euro ($143 billion) package will be needed in Spain and Portugal.'

HUH? The rescue failed, so the failed plan should be extended to other countries too?

We hear a lot of talk about political extremism. But fiat currency constitutes an extremist secular religion. Its brainwashed adherents exult that governments 'face no revenue constraint,' meaning that they can print the currency to service debt if tax collections don't suffice.

But markets have started to see through the money illusion. The abstract quantity of interest on debt has compounded beyond the ability of the bricks-and-mortar, flesh-and-blood economy to service it. More debt is no longer the answer.

+1 Greek bond market is on holiday. LOL

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Re: Greece: 'We don't need no stinkin' restructuring'

The question now is will the unrest displayed during the national strike be sustained, spread, or die down - I think this will affect how quickly (or slowly) Europe faces up to the need for debt restructuring - an acknowledgement of reality if you will. Seems to me that unrest is simmering all over Europe.

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Re: Greece: 'We don't need no stinkin' restructuring'

Thursday -- the crisis deepens:

The pledge of a 110 billion-euro ($142 billion) bailout for Greece from euro-area countries and the International Monetary Fund failed to assuage investors’ concerns.

Credit-default swaps on Spanish and Portuguese banks rose to records, according to CMA DataVision prices. Portugal’s Banco Comercial Portugues SA increased 37 basis points to 516 and Banco Espirito Santo SA climbed 26.5 to 537.5. Contracts on Spain’s Banco Santander SA rose 16.5 basis points to 223.5 and Banco Bilbao Vizcaya Argentaria SA jumped 17.5 to 239.

Swaps on Greece, Portugal, Spain and Italy rose to or near all-time high levels. Swaps on Greece surged 15 basis points to 859, Portugal climbed 18.5 to 434, Spain increased 11 to 241 and Italy rose 10 to 197, CMA prices show.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDoH1XbCS9wg&pos=7

Only one place to hide, as European shares and bonds tank:

May 6 (Bloomberg) -- The price of gold in euros jumped to a record today as a slump in the currency prompted investors to buy bullion to preserve their wealth. Holdings in the biggest exchange-traded fund backed by bullion reached an all-time high.

Gold denominated in euro has advanced 20 percent this year as the 16-nation currency tumbled about 11 percent on concern that the region’s debt crisis may spread even as the European Union and International Monetary Fund agreed on a 110 billion euro ($143 billion) bailout package for Greece. It reached a record 921.2842 euros today and was last at 919.75.

http://www.businessweek.com/news/2010-05-06/gold-in-euros-francs-largest...

Thousand-euro gold is becoming more probable, as the dying EU dinosaur thrashes in its tar pit.

 

 

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Re: Greece: 'We don't need no stinkin' restructuring'

Ambrose Evans Pritchard:

Are We Nearing Capital Controls?

"As Jacques Cailloux at RBS and others have been saying for nearly two weeks now, the European Central Bank must come down off its high horse and launch a massive purchase of eurozone bonds — ie QE, printing money, eurocopters, call it what you want — which means tearing up the EU rule book in the process.

If they refuse to do this, they must expect to see their short careers in Frankfurt come to a swift end, and to see the Eurotower in Frankfurt boarded up.

Will it happen today when the ECB’s governing board meets in Lisbon? Almost certainly not. The Germans are adamantly opposed, fearing the Weimar virus. Axel Weber from the Bundesbank has has already fired a warning shot. So once again, the EU response is being paralysed by the conflicting philosophies of the Teutonic and Latin camps."

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100005425/ti...

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Re: Greece: 'We don't need no stinkin' restructuring'

Krugman writes on his blog:

The consensus that Greece will end up defaulting is probably too optimistic. I’m growing increasingly convinced that Greece will end up leaving the euro, too.

http://krugman.blogs.nytimes.com/2010/05/05/greek-end-game

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Re: Greece: 'We don't need no stinkin' restructuring'

Gold calls b.s. on the bankster clowns:

Thurs. 2:12 pm -- Gold at $1,201.70 in post-pit, electronic trading.

Managing a global Ponzi scheme by daytrading the supply of bankrupt government paper has to rank as the stupidest idea since communism.

The euro is a Yugo, thanks to turbo-injected sovereign junk debt.

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Re: Greece: 'We don't need no stinkin' restructuring'

Oh, NO, it's Friday! Another day older, and another day deeper in la merde:

May 7 (Bloomberg) -- The cost of insuring against losses on European bank bonds soared to a record, surpassing levels triggered by the collapse of Lehman Brothers Holdings Inc., as the sovereign debt crisis deepened.

The Markit iTraxx Financial Index of credit-default swaps on 25 banks and insurers soared as much as 40 basis points to 223, according to JPMorgan Chase & Co. The index closed at 212 basis points March 9, 2009. Swaps on Greece, Portugal, Spain and Italy rose to or near all-time high levels.

Contracts on Spanish and Portuguese banks rose to records, according to CMA DataVision prices. Portugal’s Banco Comercial Portugues SA increased 63 basis points to 589 and Spain’s Banco Santander SA rose 18 basis points to 259. Swaps on Greece surged 75 basis points to 1,008 before the advance was pared to 964, Portugal climbed 42 to 502 before cutting its increase to 461 and Italy rose 24 to 255.5 before trading at 238.5. Spain increased 14 to 288 before falling to 269, CMA prices show.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSVzucla6Dh0&pos=5

Europe's one-trick-pony 'leaders' meet this evening to discuss 'more of the same, piled higher and deeper.' If 110 billion euros of new debt won't solve the problem, how about 1.1 trillion euros? Like the alcoholic whose bottle let him down, these debt addicts just can't believe that their universal remedy for hurting countries don't work no more.

German Chancellor Angela Merkel and other euro region governments are set to arrive in Brussels about 6:15 p.m. local time for a summit called five days ago to draw “conclusions” from the Greek crisis. The final press conference is slated for 10 p.m.

Conclusion: the tertiary stage of Eurosclerosis is EuroAlzheimer's. Stick a fork in your ear, Angela -- you're done! Kiss

 

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