One of the more ominous news of the day came from Reuters, which reported that the previously disclosed rumor that Spain was seeking a €250 billion bail out package, had in fact originated from high-placed German officials. The move, which will could easily set off an intraeuropean cold war, was prompted by the increasing schism between Europe's (so far) solvent core and the insolvent Club Med, and was intended "for Spain to take tougher austerity measures to cut its huge budget deficit." Instead, the tsunami of denial that resulted, only exacerbated matters and made it seems like Spain is truly on the brink. Compounding this animosity, was the disclosure that Spain's direct counterattack took the form of the El Pais story that "quoted Spanish government officials as saying Madrid wanted to publish the results of stress tests being conducted on its banks to reassure markets" a move which has been opposed by Germany and especially by Austria, which believes that publishing the true deplorable state of affairs of its Erste and Raiffeisen Bank would cause yet another bank run. At the end of the day, none of this helped either unlock Spain's frozen interbank or money markets, or encourage a sense of credibility in the euro (turns out that was only courtesy of the biggest short squeeze in Euro history). In fact, if such political low blows are to be expected, it is only a matter of time before all investors completely desert Europe and let it deal with its escalating vendettas on its own. Yet all of this pales in comparison with the very sweaty locker room war that was just unleashed by Fox Business' Charlie Gasparino against CNBC, and particularly its early morning anchor, Joe Kernen.
More on Cold War for Gen K(eynesian unwind) from Reuters:
European diplomats say the background to the leaks and counter-leaks lies in pressure from Germany -- Europe's economic powerhouse and main paymaster -- for Spain to take tougher austerity measures to cut its huge budget deficit.
The Germans seem to have fired the first shot, telling journalists in Berlin on condition of anonymity on June 7 -- the day the German coalition agreed on its own austerity package -- that Spain was on the brink of seeking a European Union bailout.
Diplomats said Spanish Prime Minister Jose Luis Rodriguez Zapatero was furious and demanded to know in Berlin and Brussels where the reports were coming from.
The counter-attack began on Tuesday, when El Pais newspaper quoted Spanish government officials as saying Madrid wanted to publish the results of stress tests being conducted on its banks to reassure markets -- a move hitherto opposed by Germany.
"If the results of the tests were known there would be more than one surprise," one of the sources was quoted as saying, noting that Spanish banks had performed well.
The next day, the Bank of Spain said it would soon issue unilaterally the results of tests of capital adequacy and risk resilience being conducted on Spanish banks.
That forced the hand of EU leaders, meeting in Brussels on Thursday, who decided at Zapatero's initiative, with the support of the European Commission, to make bank-by-bank results public on the top 25 banks by the end of July.
If you are not afraied yet, you should be. Very.
EU officials, reluctant to speak on the record about the dispute, said the European Commission was flabbergasted by the leaks, which were damaging the euro zone.
"We simply cannot understand how this can be in Germany's interest, or anyone's interest in the euro area," an official involved in crisis management said.
This is the kind of "accord" that is permeating Europe right about now: what initially was just a war of words between Germany and France, has escalated into a war of actionable attrition, as the German rumor most certainly had a very adverse impact on Spanish bond spread. The simple conclusion is that Germany is now actively trying to scuttle the European rescue, and will not stop before the euro plunges, or goes extinct. It is certain that this media circus will only get worse, although it will wipe out Spain first, before it comes around and test just how stable those sub 3% Bunds really are.
However, while far less geopolitically relevant, a far more entertaining debacle, will be the now open war between Fox Business and CNBC.
Earlier, while reporting on what the alleged "true" form of BP's financing package will be, Charlie went to town on CNBC's Joe Kernen, who said Fox Biz is a "bunch of wingnuts", regaling his viewers and Liz Claman with an episode straight out of Midnight RunExpress: "I used to play this little game with [Kernen] in the locker room after we worked out, and he had visages of a prison scene... I used to walk around him and talk to him, and he used to sweat after taking a shower, he saw my tattoo, my hairy chest."...we just need Kneale to chime in about digital dickweeds and the grotesque would be complete.
Another amusing thing we learn is that according to Gasparino, should BP go ahead and do a Reg-S/144A bond offering with a full prospectus, he "would have 5 days worth of stories, it would be amazing. I am gonna kill them on the prospectus." Alternatively, the story goes, a loan document, which has a far more narrow scope, would be able to avoid the type of SEC-mandated disclosure that accompanies bond reds. Of course, none of this is even remotely relevant: BP's balance sheet at this point is very much irrelevant, and the entire fate of the company lies in whether the batting of a butterfly's wings in China will create a hurricane in the GoM in the next month. Should this happen it is game over for the firm. Which makes us wonder - just how do those who pitch long BP positions hedge for what is basically a binary outcome, in which the downside climatic and otherwise variables can only be controlled by god's proxy on earth, Goldman Sachs (especially since GS just issued a cautiously optimistic outlook on BP, which if the success of the firm's EURUSD calls are any indication, means the end is near).
Either way, we can't wait for Kernen's response, and for the dirt on Chaz to finally start flowing from CNBC's female anchor population, who are now prohibited by FCC rules from further lowering/shortening their necklines/hemlines, without garnering an NC-17 rating for GE's propaganda channel, and thus will do anything else to generate some incremental viewership for the ratings troubled station.
Check out the clip below: