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Inferring the Truth?

Now everyone is agreed.

Now everyone understands the complexities.

It's time to re-assess.

And today - the German press, opposition, Monti appearance, Sarkozy's 'favorable compromise' - gave me much to contemplate.

For non-Europeans, particularly US-centric investors/traders, this has been already been a difficult journey. But, as an Irishman and long(ish) time market participant, I'd advise you not expect a simplistic outcome. In fact I suspect this 'crisis' could be about to get even more convoluted.

German policy makers might be doctrinaire but they are not naive. They know the consequences of a disorderly Euro break-up but they are constrained by (German) public opinion & their assertive Constitutional Court. However, this does not mean they cannot utilize increasing tensions (& yesterday's Bund auction might be pivotal) to coerce popular opinion towards some fiscal concession.

I've consistently dismissed the illusion the ECB would 'do a Fed' &/or there could be some ready made Eurobond solution. The belief is either solution was born of hope &/or a poor appreciation of European (Germanic) history &/or treaties.

In my humble, I was also highly skeptical of the notion the EFSF could be 'leveraged' into an effective firewall. Without increased (hard cash) commitments from the core that was never plausible.

All this is now well understood, but that by no means assures the mutual assured destruction of the Euro. 

Far from it.

The Germans (& the the more mercurial French) are not going to walk blindly into the night. I believe there is yet another 'solution' in the making.

I admit the following is pure conjunction - my own opinions - but please consider the probabilities & the implications for your trading/investing.

The 'solution' won't be a TARP-like 'big bazooka.' It won't involve splashy $trillion-type numbers. It will be fiendishly complex - even for nerdy Europeans. And it might even work.

It will seep out, but in short, the Germans are looking for cover. And the cover will be:

(1) A legalistic agreement to implement 'treaty changes' that impose penalties, constraints, and the appearance of 'Fiscal Union';

(2) A <done> deal that irrevocably taking the ECB out of the money printing business - unless your a commercial bank of course.

This will supposedly restore the 'trust' Merkel says has be missing, provide the political spin, and pave the way for some type of 'Stability Bond' - a second tier of government bond issuance (promoted by several economists) - &/or additional backing for the EFSF, &/or some derivative of a derivate of ......

For the record - I remain deeply skeptical the Euro can survive with or without serious damage to the European economy.

But I don't under-estimate their ability to 'kick this down the road.'

Watch the bearishness. And stay tuned.