Wednesday, October 5, 2011


The French, I mean.  I always thought "chutzpah" was a Yiddish word but here I am, wrong again.  It's French.  Now there's no secret that among the Euro banks the French contingent, if not the shakiest, then certainly right up there with the worst of them.  So just a two weeks ago we found ourselves listening to Mme. Lagrande, now of the IMF but late of the Tresor call for the urgent need to recapitalize the Euro banking system.  One might ask where she suddenly found this new religion it having been her job in her former life to oversee the health of the French banking system but that would be boorish.  And so, we remained silent for the most part and nodded assent to this astute revelation on her part and waited for the plan.  We got it today from Mme. Lagrande successor.

Now whilst there is a central bank for Europe it has always been understood that the member states took care of their own when it came to the banks.  Not any more.  In a burst of pan-Euro stateism the new head of the French Treasury announced today that it was his view that a recapitalization of the French banking system was surely needed but it should be undertaken by ALL of Europe working in consort rather than by France alone and that would apply to all the other banks, blah, blah blah.  There seems to be no limit as to the resources of Germany or the German taxpayer in the view of France.  Now, if you still believe in the eventual fiscal and political union of Euroland just watch what happens to this modest proposal in the coming days.  There might be a brief mention of Alsace/ Lorraine prior to a firm "Nein" but that will be about it.  These guys just can't get rid of this "Eurobond" idea even though half the world has told them it's a non-starter.  Then again I though chutzpah was Yiddish; I'll probably be wrong again but I doubt it.

On this news as occured yesterday, the stock markets moved smartly upward confirming belief that these markets have forgotten fundamentals and now trade on emotion alone.  Now I have said that the Banks are a priority for the Euros but they understand that unless they are convinced that whatever happens in the Greek restructure doesn't spill over to Italy of Spain nothing is really acomplished.  Massimo has convinced me that the Italians are going to take care of business (I'm always a bit nervous when I hear that from Massimo) but I believe him.  Ditto for Spain,  but when emotion rules the markets and the volatility is so high it's always a dodgy bet.  Despite what the bloggers say, there is nothing firm out of Europe at this stage which is why I still believe that the Greeks are going to get another advance in order to buy some time.  Try as I might I can't find anther path that can be taken just now.  The result is a forgone conclusion but perhaps they can muddle on for another month or two.  By then it will be near Christmas and nobody will approval anything meaningful then so maybe another month or two...then again, there's tomorrow and who knows what that will bring.  Stay tuned.

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