If you think we were scary yesterday about what is going on in Europe, read this. Very scary…
- European policy makers may need to provide as much as 600 billion euros ($794 billion) in aid or buy government bonds if they are to stamp out the region’s spreading fiscal crisis, said economists at Goldman Sachs Group Inc., JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc.
For the rest of the article, see Bloomberg
There are still buyers of Greek debt though:
- Eric Kraus, a strategist at Otkritie Financial Co. in Moscow, said he’s buying Greek bonds on the bet policy makers will eventually strike back. “Sooner or later those morons in Brussels and Berlin will realize that they are playing with fire, have already been burned, and will have to stop feeding the flames,” said Kraus, who works at a brokerage part-owned by Russia’s second-biggest bank. “Then we should see a very nice bounce.”
So, ways out of the crisis (not mutually exclusive):
- Massive package to Greece ($100B+) only and hoping this will calm the markets
- Massive fiscal retrenchment
- European countries mutually guaranteeing each-other’s debt
- A massive, TARP like program buying up public debt
- ECB buying bonds on the open market (monetizing it)
- Greece leaving the euro and defaulting (“restructuring”) on its debt and hoping the rot will stop there
- A euro implosion.
Anyone think this is going to be easy? Anyone think what the necessary fiscal retrenchment (a must be part of any solution) will do to the European economy, and thereby, to, well, the budgetary and debt situations?