Merkel in denial

SocGen CEO is on Bloomberg TV this morning after his appearance on CNBC yesterday defending the banks balance sheet positioning and liquidity after the 20% 2 day stock drop Friday and Monday. The stock is up 5% today but BNP is at the lowest since March ’09 after the WSJ got this quote from an exec there spoken last week, “We can no longer borrow $’s. US money market funds are not lending to us anymore…Since we don’t have access to $’s anymore, we’re creating a market in euros. This is a first…We hope it will work, otherwise the downward spiral will be hell.” Notwithstanding these comments, the euro basis swap is somewhat narrower and the euribor/ois spread is as well and the euro is bouncing. Reuters is reporting that Merkel and Sarkozy will comment on Greece today. The choice is now stark for them, continue this process of bailout because of fears of contagion or say enough is enough, the time has come for real debt restructuring and we’ll deal with the fallout as best we can. Italy sold 5, 7 and 9 yr maturities at yields around 5.5% and yields there are higher in response as they didn’t sell all that they wanted to. Getting a large commitment from the Chinese is easier said than done. The Shanghai index fell to just shy of the lowest since July ’10.

German PM Merkel in an interview is not speaking like someone who is prepping the market for an imminent Greek default. She sounds more like a control politician who is in fantasyland with what is going on around her, with all due respect. Here are quotes from the news services, “Greece default won’t solve debt crisis…No quick one word solution to debt crisis…Must allow time to solve euro debt crisis…All we do in Euro area needs to be controlled…Need to know consequences of actions in Euro area…Want to find way to meet Finnish wish for collateral…Confident to find solution on Greece collateral…EFSF secondary market interventions to help minimize contagion.” Ugh is all I have to say on this.

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