European finance ministers with a bit of help from the IMF combined to form a $645 Billion Fund to Fight the “Wolfpack”

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, according to three officials at the talks in Brussels. An additional, unspecified sum may come from the International Monetary Fund, the officials said.

“We are going to defend the euro,” Spanish Economy Minister Elena Salgado told reporters as she arrived to chair the meeting yesterday. “We think we have a duty for more stability for our currency. We will do whatever is necessary.”

“Europe is getting its act together,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Time will tell if this statement is enough to satisfy the European bond market vigilantes.”

“In the night, when the markets are opening, we cannot afford a disappointment,” said Finance Minister Anders Borg of Sweden, one of 11 EU nations not in the euro. “We now see herd behavior in the markets that are really pack behavior, wolfpack behavior.”

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. Trichet is in Basel, Switzerland, for a scheduled meeting of central bankers from the Group of 10 nations. Vice President Lucas Papademos is attending the Brussels talks.

I do not know what tomorrow or even next week brings, but what I do know is you cannot defend the Euro by printing 440 billion of them.

Flashback December 2, 2004: Euro slips after Trichet remarks

European Central Bank president Jean-Claude Trichet has raised the possibility of intervention in currency markets to halt the euro’s rise against the US dollar.

The euro had earlier hit a record high of $1.3384, though it fell back below $1.33 later after Trichet’s remarks. ‘We consider the recent moves unwelcome,’ he said.

So Trichet did not like it when the Euro was at 1.33 and he was furious when it hit 1.60. Now that it is back to 1.27 he wants to defend the Euro.

Is this clown ever happy?

As I said before, all this talk about defending the Euro is nonsense. The EU is defending a piss poor decision to let Greece into the EU. Now, under guise of “defending the Euro” they are willing to print 440 billion of them.

No doubt the finance ministers will be cheering tomorrow. Let’s see for how long.

Mike “Mish” Shedlock
Click Here To Scroll Thru My Recent Post List