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EU Judgment Day Today: Key Events, Essential And Unavoidable Short, Long Term Solutions

 
Today could be the day that stabilizes the EU crisis, or greatly exacerbates it. The EU is on the brink once again. Wednesday it was reported here that Citibank Chief Economist Willem Buiter, Greece, Ireland, and Portugal are beyond the point of recovery, and Spain is nearing that point. Spain, however, is considered too big for current EU/IMF funds to rescue. Italian and Belgian bond rates are also soaring.
 
The Two Decisive Events
 
ECB Press Conference
 
This is potentially the biggest event this week. Markets are hoping for a major announcement of a plan to restore confidence and lower yields on PIIGS bonds, which would effectively halt ongoing contagion fears that Portugal and possibly Spain will soon need EU aid, and thus the current latest chapter in the EU sovereign debt/banking crisis. Investors are hoping for an expanded bond buying program to scare of speculative attacks on PIIGS bonds that threaten to cut off Portugal and Spain from credit markets and force them to seek EU aid.
 
Spain’s funding needs are beyond the means of the current EU/IMF package, yet it is far from certain that it could be expanded in time to prevent a Spanish default that would likely lead to a wave of defaults among the PIIGS. That’s because PIIGS bond yields would rise so high as a result of any single EZ member default that none of the rest would be likely to sell bonds at rates they could afford to repay, meaning a domino-effect wave of defaults among the PIIGS, the big money center EU banks that hold their bonds, and unknown other banks and third parties that would be indirectly effected.
 
We will know if markets are disappointed merely by watching credit default swap (CDS) rates on PIIGS bonds. It that rise continues, then the EU crisis will continue to pressure markets and risks another collapse like we saw this past spring. Events are unfolding faster than they did with Greece because of the spring experience and its anticipated repetition.
 
Spain Bond Auction
 
Last week yields spiked, demand was poor, and the auction was seen as a failure that could be the start of more. The fear level of the current crisis moves with PIIGS bond yields. Yields and sentiment stabilized yesterday on a batch of good economic data from the UK, China and Germany. If today’s auction goes better (expect the ECB to do all that it can to insure that it does) that would help further ease pressure on the EU and ECB for radical aid packages.
 
Ramifications
 
 
If the above succeed in lowering PIIGS bond rates then:

for details on the following see article by same basic title at www.fxinsights.com
 
Market Ramifications....

EU and Euro Ramifications....
 
The EU has bought some more time to work on the key near term solution to buy needed time to develop the longer term but more complicated solutions. These include:....
 
 
 
Longer Term Resolution Solution..
 
Even if the markets soar in ecstasy over the results of the above, the effects will at best be short term. Over the longer term the EU crisis will continue to periodically weigh or even crash global stocks, commodities, and risk currencies (especially the EUR) until:.....
 
 
Conclusion
 
Without both of these minimal ...

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