Something must be happening behind the scenes, but clearly more pain is required before the political leaders will commit to a real solution (ECB printing, Eurobonds, Germany leaving or PIIGS leaving). Markets are slowly but surely adding pressure through bond yields and a negative feedback of margin calls, liquidation, bank balance sheet reduction and market’s lack of faith in increasingly meaningless statements is going on.
With some luck, they can muddle through the holiday period, perhaps by canceling bond auctions or using ECB support to give the illusion that the situation is not hopeless. I just do not understand what the hell they expect to change in the coming months. Is the idea that banks can offload their positions in the European sovereign junk bonds to the ECB, and then a real solution is made? Or am I too optimistic in my assessment of the euro leaders’ capabilities, and they are in fact just stunned? This is what I mean with today's headline: for policymakers, the VERY local optimum is not doing anything for now, and that is very, very far away from the global optimum of doing something.
