Gold soared to new heights yesterday, topping $1,261 per ounce as more worries over the Euro Zone debt contagion spread. The leading credit agency in Europe, Fitch, is warning that unless the European Central Bank (ECB) starts showing some muscle, what little economic recovery there is will slide into a double-dip recession. Some two trillion Euros ($2.4 Trillion dollars) of debt are coming due by the end of 2012. Bridget Gandy of Fitch says, “There’s am awful lot of debt coming due in 2011 and 2012, and that is becoming a concern.” Tensions between French President Sarkozy and German Chancellor Merkel are heating up over who is going to foot the bill?

In April, the ECB agreed to bailout Greece, buying their bonds, as well as those of Portugal and Ireland, to the tune of €47 Billion, with 25 Billion Euros going just for Greece. What is causing much of the concern are two things. First, it seems that the German Bundesbank is upset that the French banks are not buying their fair share of the debts. Secondly, Spain is now looking to be the bigger problem. Silvio Peruzzo of RBS (Royal Bank of Scotland) says, “The ECB needs to act before contagion becomes endemic. Spain’s banking system in the heart of an ice-storm and there is a risk of ‘sudden stop’ if they can’t roll over debt.”

Marco Annunziata of UniCredit also warns about Spain. “Spain has raised the stakes, and market expectations. Now it will need to show it is up to the challenge. Spain is the Euro Zone’s lynchpin. If it fails, the Euro Zone’s wheels will come off.” Andrew Balls of PIMCO, the world’s largest private buyer of bonds and treasuries, says, “The European sovereign problem has started to contaminate the European banking sector and the global economy.”

As I have been writing recently, the political will to tackle the sovereign debt crisis in Europe has been shaky at best. We’ve seen strikes and riots in Greece, Spain and France, as their governments initiate austerity measures. In Germany, the coalition government of Chancellor Angela Merkel is on the verge of collapse as they have now proposed sever cuts in spending on social and state welfare programs. France just recently cut it’s budget by around $50 Billion dollars, a small pittance as we shall see.

This past week the debt crisis has been updated with new numbers. The amount needed to cover the debts of Portugal, Ireland Greece and Spain has gone up from $1 Trillion dollars to $1.6 Trillion dollars. The French banks hold a majority, some $500 Billion of this debt. In America, the mortgage giants of Fannie Mae and Freddie Mac have declared that they need more bailout money. The amounts range from a minimum of $160 Billion to as much as $1 Trillion dollars. Fresh from attending the Bilderberger meeting, George Soros spoke in Vienna last week saying that we are now entering “Act II” of the global financial crisis due to Europe’s debt problems. Even the Godfather of Central Banks, the Bank of International Settlements (BIS) released a report this week stating that currency collapses may, in fact, be a good thing and help stimulate an economy. HUH?

The situation in Europe is getting very grim, indeed. The big question is who will bolt from the European Union first? France or Germany? The French seem to be taking the lead as they head for the Exit Door. But do not rule out Germany passing them by. Should Merkel’s coalition fall apart, the whole EBC-IMF super-bailout of $1 Trillion dollars proposed may come crashing down. Should that happen, who will the ECB be able to turn to and shakedown for the next $2.4 Trillion dollars needed to keep the bailouts going through 2012?

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2 Responses to “ECB Shakedown-Smackdown: France vs. Germany! Who Will Bailout Whom?”

  1. 1
    Scooby Doo Says:

    I guess the World Cup and oil spill have knocked Europe off the headlines. How convenient!

  2. 2
    Kisha Ricucci Says:

    I do tend to go for the underdogs in sport….but man Argentina just appear like they are going to take control of the world cup….Messi is just absolutly Remarkable….And there is not a doubt in my mind that he is the best player in the world….