The now functioning but still waiting to be capitalized European Stability Mechanism should have a sign in front reading “Break Glass in Case of Emergency.” Following a story late yesterday, Spain seems to be exploring the option of establishing a credit line with the ESM that they could tap if needed. Spain’s thought is that if people know that this is a ready to use option, investors won’t tempt fate by selling off Spanish bonds, thus Spain may never have to break the glass. Hank Paulson said something similar with FNM and FRE but we’ll see this time. Some lawmakers in Germany are saying they would be open to this and its helping to lift sentiment in Europe, the euro and for the S&P futures. Greece is again calling for a 2 yr extension to its budget plans but the question of where the extra money is going to come from in the interim hasn’t been decided. German investor confidence in their economy over the next 6 mo’s improved to -11.5 from -14.9, the least negative in 5 mo’s but current conditions fell 2.6 pts to 10, the lowest since June ’10. Euro CPI in Sept was unch at 2.6% y/o/y, above the ECB 2% target for the 22nd straight month. UK CPI moderated to 2.2% from 2.5%, the lowest since Nov ’09.
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