Wallowing

The EU is thinking and that is trouble

The private market, banks, lent money to Greece, Italy and other less than austere bedfellows for returns that were multiples of lending to austere Germans. In chasing higher yields bank credit analysis, questionable in the best of times, was left in the elevator.

That the less than austere are unable to squeeze enough revenue out of their citizenry for interest much less principal payments surprised only the regulators to whom banks have turned, the EU and IMF, for salvation and the Catholic Church for confession. Though the Church has reprimanded the Italians not for financial profligacy but the unsavory redress of the sins of lust and greed in public.

The EU rainy day piggy bank, ESFS, will be underfunded by three fourths even if all 17 member states agree to add to the till which would require the ESFS to do precisely what the banks did, borrow against the corpus to repay banks that borrowed to lend to the less than austere and lusty.

In the orderly power point world the EU has been instructed to complete the procedural exercise of approval before global governments convene on 3 November.

The convention will contemplate imposing financial penalty on errant government finances in the future if the metrics of debt to GDP and fiscal deficit to GDP are not abided.

In the meantime the citizenry will object, strenuously, to the new austerity and the EU may well be left to reconsider the considered plan.

Short equities, long dollars