Infighting over the size of the bailout fund has broken out as the Belgian Finance Minister Breaks Rank with German Chancellor Merkel
Belgian Finance Minister Didier Reynders said the euro region could increase the size of its 750 billion-euro ($1 trillion) bailout fund, breaking ranks with German Chancellor Angela Merkel and France’s Nicolas Sarkozy.
Reynders told reporters in Brussels that the current cash pool could be increased if governments decide to create a larger fund as part of a permanent crisis mechanism in 2013. “If we decide this in the next weeks or months, why not apply it immediately to the current facility?”
While Sarkozy and Merkel rejected expanding the fund on Nov. 25, European Central Bank President Jean-Claude Trichet yesterday indicated governments should consider just such a move.
The International Monetary Fund also supports increasing the facility after 2013, said Reynders at the end of a week that saw Belgian bond spreads jump to the highest in at least 17 years.
“The difficulty we have is like other countries in Europe: we need to solve the problem of contagion coming from Greece, Ireland and maybe now Portugal,” Reynders said. “We don’t have any real problem in Belgium for the moment like that.”
“The permanent mechanism must be with a huge amount of money — if you don’t organize, you always have speculation if it is enough for one, two or more countries,” Reynders said. “For the moment the discussion next week will be about approving the plan for Ireland and then to have some information about the situation in Portugal.”
Pressure Cooker Gauge on Red
I suggest that if such an announcement mattered at all, it would be in the opposite manner these clowns think. If anything, it would cause an emperor-has-no-clothes moment that would spook the market and crash the Euro.
Greece and Ireland are insolvent. Spain, Portugal, and Belgium are under sever stress. The proper way to alleviate the stress is to admit a need for haircuts on senior bonds, and take those haircuts.
Unfortunately, instead of considering haircuts on senior bonds, ECB president Trichet, Christian Noyer (the governor of the Bank of France), and Belgian Finance Minister Didier Reynder, all insist there will be no haircuts.
The instruction manual says the cooker will explode if the pressure is too great, yet Trichet, Noyer, and now Reynder keep increasing the pressure. The longer they attempt to walk this irresponsible line, the more the pressure will build.
How much more pressure the cooker can take is anyone’s guess, but the gauge is clearly in the red zone and the cooker is liable to explode at any time.
Mike “Mish” Shedlock
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