Dear Chancellor Merkel, President Sarkozy
The market has indicated the extend-and-pretend session that you have come to love, is over. It’s now time to do or die.
Hoping-against-hope the problems will go away will no longer work, and in fact never worked ever (it just eventually made the problems worse).
So, either you put together a credible plan for a fiscal union or you put together a credible plan for a breakup of the Eurozone. Since the former is impossible because of German supreme court rulings, common sense would dictate you start working on the latter.
In the meantime, if you come up with a credible plan to recapitalize insolvent banks, a plan that sticks it to bondholders and not taxpayers, a plan that lets Greece default, perhaps you can appease the market and buy additional time while working on a vitally needed plan B (a breakup of the Eurozone).
I am not sure how long the market will give you on the these plans. It could be as little as two days or as long as five weeks, but action in the banking sector and stocks in general says not long.
ECB President Jean-Claude Trichet, Prime Minister Papandreou, Prime Minister Berlusconi, Eurogroup Chairman Jean-Claude Juncker
Mike “Mish” Shedlock
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