Eurozone Is 'Myopic' And Discord Is The Only Certainty

by: Carlos X. Alexandre

The storm of dark messages and conflicting accounts coming from Europe every hour, and the endless list of plans, funds and acronyms, only states that there is no plan. Threats have been delivered non-stop to the so-called periphery offenders, and thus far not a thing has been done, while the money keeps flowing. When uncertainty sets in, the only thing one can do is to get out, which in itself exacerbates the problem, and Fed President Charles Plosser added to the sentiment.

The Fed and regulators have tried to stress to money market funds, for example, to reduce their exposure to European financial institutions.

Yes, the European debt subject is getting old, but the time for the realization and acceptance that the system is broken and was never whole, as pointed out by the Mario Draghi, is slowly grabbing headlines.

"The configuration that we had with us by and large for 10 years which was considered sustainable, I should add, in a perhaps myopic way, has been shown to be unsustainable unless further steps are taken,'' European Central Bank President Mario Draghi said before the European Parliament, according to several media reports.

Meanwhile the state of denial persists, as "Spain Delays and Prays That Zombies Repay Debt: Mortgages" and suspicions are validated when Mikel Echavarren, chairman of Irea, a Madrid-based finance company specializing in real estate explains that "the problem hasn't been quantified by anyone because there is huge pressure not to tell the truth."

Thus, is there a point in doing the math when the data is flawed? The only assumption shall be that the situation is worse that what we know.

And if one hasn't noticed, the rumor that China is the savior of last resort is no longer making the rounds, while the Chinese economy is experiencing its own "technical difficulties." As Bloomberg reported last month, "CIC Stops Buying Europe Government Debt on Crisis Concern," citing financial turmoil as if anything had changed. In addition, the other BRICs - Brazil, India, Russia - are quickly turning into basket cases, absent the health of their much cherished markets.

To exit the euro, or not to exit, that appears to be the question, and 1 trillion euros was advanced as the cost if Greece decides to head for the door. How much for Spain? But it's not that simple. Even if euro bonds come to pass, which Germany adamantly opposes for obvious reasons, the debt is still there, not to mention the "unsustainable system" as put forth by Mario Draghi.

"The ECB will be insolvent" if Greece were to exit the euro, (Charles) Dallara said. "Europe would have to first and foremost recapitalize its central bank."

Aside from the Greek political far left forcing Angela Merkel's hand with threats of its own, EU rules also stand in the legal way of debt mutualization, as well as Germany's constitutional court. So an olive branch was extended, and the word is that Germany softened its position.

The German government shifted ground on Friday, supporting a European Commission proposal to give Spain more time to reduce its budget deficit, in a sign Berlin is prepared to take a more flexible approach to tackling the euro debt crisis.

As the European Union continues to prove that it's anything but a union, the major question is much simpler: Who's going to pick up the pieces? Since Spain's deputy Prime Minister Soraya Sáenz de Santamaría met with Timothy Geithner, I already set some tax money aside to contribute to the inevitable "save-the-day-plan" by the usual suspects.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.