Second Half

It looks as if the tea break is over in the European crisis:

  • There are rumors that the take-up on the Greek “voluntary” PSI is around 20%, when 66% is needed for a cram-down based on collective action clauses. Hold-out groups are quietly being organized (including, apparently, the Greek police pension fund), although only one, the holders of Swiss Franc denominated bonds, has made a formal announcement. Greece is threatening Armageddon. Thursday is the day. Who will blink?
  • The Prime Minister of Spain has announced that he intends to ignore the agreed goal of a 4% deficit as 5.8% now sounds better to him. Of course he cannot borrow the money unless the ECB keeps buying his bonds? Will they enforce the agreement?
  • Italy and Spain’s numbers are terrible, Europe is slipping into recession overall despite the German engine still firing on all cylinders and likely to continue to do so as a result of the weak Euro.
  • Francois Hollande seems likely to beat Sarkozy in the French elections. He is Merkel’s worst nightmare and she is pulling out all the stops in trying to defeat him, even campaigning for Sarkozy in France. Is that helping or hurting?
  • The third largest party in the Netherlands is calling for a referendum on leaving the eurozone and returning to the guilder. British research firm Lombard Street has calculated that Dutch per-capita income would be €1,800 ($2,375) per year higher if it had never joined the euro.
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