Back in Europe, banks and investors are anxiously awaiting the “stress test” results for European banks.
Alas, the stress tests don’t include the possibility that Greece and Spain may default on some of their debts, while there is no sign as yet from the ECB that Euroland will back these debts should push come to shove.
As one German wag described this endless cycle of rhetoric, inaction, and denial: “A stress test without stress”.
Nobody really wants to talk about sovereign debt restructuring, because that implies the ECB rescue package will not work.
What should be happening, namely the withdrawl of Greece, Portugal, Ireland, and possibly Spain from the euro, the devaluation of their new/old currencies, and a substantial increase in German domestic consumption, is not acceptable politically, but may happen anyway if the markets decide they’ve had enough and resume contagion.
For the first time, banking analysts are starting to talk about French debt, and if that’s in question then the Euro may collapse.
Gorilla says: “Trichet has had his day!”
