The Mess Called Europe

That lasted long.  The markets are now on day 3 of a continued downtrend after the latest agreement came out of Europe early last Thursday morning.  With many i's not dotted and many more t's not crossed there is a ton of uncertainty surrounding the latest deal from Europe.  This has been witnessed by the rising spread between Italian bonds and their German counterparts since the announcement.

Now to add another wrench into the spoke, the Greeks are going to referendum on the latest European proposals.  With the ruling PASOK party's approval at lows and the unpopularity surrounding the forced austerity measures that have increased taxes and unemployment, while cutting pensions and wages the prevailing belief in the market is that the Greek nation will vote down the latest moves.  This will probably force new elections which will cause further instability.  It will also force the EU into making the difficult choices that it has not been able to make in the last 21 months.  Europe will need to step up and backstop it's banks as Greece will probably default outright.  The ECB will need to step up and purchase bonds of the weakening member states aggressively and it will need to issue a statement telling the world that it will continue to do so until things stabilize.  It will also need to drop rates.  It's time the ECB grows a sack.  Everyone can appreciate the fact that the big fear in Europe is hyperinflation, but as the central bank of the largest union in the world, it needs to balance that concern with the pressing needs that surround it currently.

Since the crisis started it has become more and more evident that the measures that Europe has implemented to address the issues at hand are not sufficient.  The austerity measures that have been put in place have done nothing but increase the deficits and put handcuffs on the economies affected.  Without the ECB accepting it's role as lender of last resort this issue will not be resolved.  It's time to flood the market with euros' in order to help prop up the struggling EU economy and address the increasing likelihood that this contagion has the ability to swallow up all of Europe and thus destroy the great European experiment.