If I were to breakdown the problem with some European countries in one statement it would be their current welfare state has run out of money. Over the past many years, lackluster economic growth was offset by easy access to credit markets in order to sustain that welfare state at very generous levels. We now know the gig is up as bond markets have revolted. With this said, a comment from the Finance Minister of France today highlighted that for them, and very likely for Italy and Spain too, there is a choice and that these nation’s have the lever’s to pull to reverse this trend. Francois Baroin said “We have the highest public spending in the G8…We have room for maneuver.” Greece’s time clock is up, they have no room but the others do so the resolution to this debt crisis comes down to politicians breaking promises and telling the truth that the current state is no longer affordable and if the people want something later, they must accept less now. In Moody’s annual credit report, France was put on notice that their AAA rating with a stable outlook is being closely watched for actions to warrant a continuation of it. In the mean time and in part, global growth continues to moderate as China reported Q3 GDP that rose 9.1%, less than expected and the slowest pace since Q3 ’09. Also, Germany’s ZEW investor confidence # in their economy fell to the lowest since Nov ’08. The BoE’s experiment of money printing continues to fail with stagflation firmly taking hold as Sept CPI rose 5.2% y/o/y, above forecasts of 4.9% and the BoE target rate of 2.0%.