The EU has decided to create TCRP, the Troubled Country Relief Program, their offshoot of our Troubled Asset Relief Program. They will do this by giving the ESM and EFSF the ability to inject money directly into banks (voila, Spain just cut their debt by 100b euros after seeing it go up by that amount a few weeks ago) instead of via countries first with unanimous consent from all EU members and with a central bank supervisor. The financial help will also be pari passu with other bondholders instead of senior and countries of banks getting help won’t experience the same EU fiscal scrutiny as before. This news is most positive for Spain and Ireland whose failed banks became the noose around the sovereign as opposed to Italy and Greece where the debt pile up was at the government level. The next question is whether the ESM/EFSF will have enough capital and assuming they don’t, will the ECB chip in by giving it a bank license thus leveraging its size. That is yet to be determined. For now, party on and turn that hour glass over as more time has been bought but only the symptoms are being fought as the underlying disease of excessive debt and lack of growth still remains.
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