WHAT A DIFFERENCE A DAY MAKES

Markets woke up this morning and looked to Euroland and didn't like what the saw one bit.  It started in Greece where, as reported, the two "centrist" parties--if there is such a thing in Greece--gave up trying to form a government, donating the task to the avowded Communist in the grooup who immediately announced that upon his success--not guaranteed mind you--the first thing he would do is reject the debt agreement with the Troika and nevermind if that meant the stoppage of finance.  Shock and horror all around.  Would this mean that Greece was gone from the Euro?  Yes, of course it would so why not figure out what to do in that case as quite frankly, anybody who forms a government is going to have to promise to deep six the debt agreement.  Anyway, the Greeks have about until the end of June before they run out of money so there's PLENTY of time.

The final numbers for the French election were closer than the original reports and whilst none of the powers in Euroland were terribly happy about the result what they fear most is the unsettled future that the results may indicate.  If Hollande were to have won, most everyone was hoping that the margin would be great enough to indicate that his mob would carry the legislative elections in a few weeks insuring a governable France; now, all bets are off.  If Hollande loses the assembly (I'm not an expert on this) the appointing of a Prime Minister goes to the opposition at which point you have grid lock like nothing we have seen in this country.  France as a leader of Euroland?  Fuggetaboutit.  The U.K., despite it's own wretched economic situation, is howling with laughter as anything bad for France is a cause of great merriment.  Of course, that isn't particularly helpful to the cause but imagine poor old Hollande, whose first stop has to be a get down and dirty meeting with Merkel, and  trying to do that not knowing whether he is going to be a mere spectator in his country'y immediate future and realizing that as unsettled as his own future is he has no chance of getting any substantial concessions from the Germans, which will result in additional political weakness, which will...well, I have my suspicions but let them play out.

And now Spain or more precisely the Spanish Financial system.  This morning everyone seemed to figure out that there might be a problem there.  As we having been trying to point out the problem EVERY WHERE is the financial system but let us not gloat and try to approach this in a calm, rational manner.  It stinks.  Like a country not too far from home the Spanish economy ran for a couple of years on the anticipation that private residences being constructed at a level about 2x the population would be sold over and over and always increase in value.  That's called a housing bubble and like a country not too far from home the financing of this miraculous  event was accomplished by savings banks who had a remarkably close association, both financially and politically with the independent Spanish states in which they were located.  Gee, never saw that before.

Anyway, not too long ago, it was deemed wise to consolidate a number of these institutions in order, as the argument went, to bring together individual financial strengths into a larger, more focused and financially powerful entity.  It was called Bankia, SA.  What it did was to consolidate an enormous pile of crap into an entity that was...you guessed it...Too Big To Fail...whether by deliberate design or just plain stupidity.  Management was assigned to the highly acclaimed former finance minister and IMF head, Rodrigo Rato who, if he had a clue, hadn't a chance, and who resigned yesterday.  Concurrent with that event, the Spanish government announced that it might be necessary to recapitalize Bankia and perhaps the entire system if deemed necessary to promote economic growth for the Spanish state.  That show had opened in a number of other capitals and did not attract full houses.  Indeed, a few of the less constrained began asking if this plan didn't sound like The Great Irish Idea to bail out banks that shouldn't have been bailed out and didn't that lead to the last two years of economic stagnation?  Rum, very Rum old boy.  Shouldn't be saying things like that.  Very Rum, indeed. Then again there's always tomorrow.  What a difference a day makes.