The path to stability in Europe seems pretty straightforward, delever, restructure and grow. This can be achieved in part with a Greek default and using the EFSF to act like a super TARP to plug holes but the political process of getting there has been and will continue to be the issue. On July 21st, the EU said the EFSF will take on new functions and hopefully in the next few weeks all 17 Parliament’s will agree to it. Enlarging and leveraging the EFSF past this has been discussed for weeks and the politics around doing it still remain tough as German and Spanish officials shot down using the EFSF above and beyond its current plan. On a Greek bankruptcy, the Austrian Finance Minister still reiterates their opposition but that’s a losing battle at this point. Greece today votes on the property tax plan in order to satisfy the next payment of money to them and Papandreou meets with Merkel. With respect to the markets, if there is one thing that occurred over the weekend when EU/IMF/ECB officials got together and saw what happened to markets last week, particularly with the bank funding squeeze, is that it may finally have created a sense of urgency where time of decision making and clarity is now of the essence. We know all the things that have been discussed for weeks on dealing with the debt crisis but its time now for action
