Short covering has begun, but remember that Greece is a tiny economy; the problems in Spain are much bigger.

And the Germans may well want to encourage a bit of currency decline to help their own flagging export economy and undercapitalized banks.

Gorilla says: “A bushel and a peck and a Euro, what the heck!”

It’s a big game of chicken among the PIIGS, Brussels, and the Chicago Merc, currently hosting the biggest bet (nearly $8 billion) against the Euro.

Gorilla says: “We’ll know at the EU summit on Thursday who’ll be ponying up, but it won’t be pretty!”

He’s right, except:

1) Many major banks, and far more minor ones with commercial real estate portfolios, are effectively insolvent, so they’re hoarding every bit of capital they can. Once they mark down their remaining worthless, toxic assets, to the tune of several hundred billion, all the capital hoarded in the world may not be enough to save them. Our Treasury Secretary is hoping that the economy will recover before that shoe drops, so as to validate his “kick the can” philosophy.

2) The Fed’s holding trillions more of these assets, having effectively swapped its independence for the high honor of being a Structured Investment Vehicle of the US Treasury. Having become a long-term investor, Ben Bernanke will channel Keynes: as dead as dead can be.

Gorilla liked the juxtaposition with this article: “In Pastiche We Trust! Bing Crosby sang it best: When the euro at night meets the gold price today, no one waits for thee!”