Goldman Sachs has for the time being been very quiet in joining all of its colleagues from around the street in screaming for an immediate intervention by the ECB or else. The reasons are glaringly obvious: with a Goldman alum in charge of the ECB, and a 23 year Goldman veteran acting as ambassador to Germany, whatever Goldman wants, Goldman will get, without the need for convincing pitchbooks and dramatic expostulations that the world is ending unless... Intuitively it makes sense for Goldman to wait: after all why not take advantage of the situation a la Bear and Lehman, and wait for 3-4 major European banks to collapse, which will be the green light for Goldman to do what it does best: step in and fill the financial and power vacuum. Needless to say, when UniCredit, Commerzbank or Raiffeisen are down, the ECB will have no choice but to intervene with or without the Fed's help. Which is why anyone looking for clues as to what will happen in Europe has to focus on Goldman alone as we already know too well how everyone else is axed. Luckily GS' Francesco Garzarelli and Huw Pill have just released a much overdue note presenting just how the firm feel ont he topic of Europe's continuation as a going concern, or, alternatively, collapse. While we present the full note below in its entirety which naturally seeks to avoid broad panic, here are some notable extracts from a nuanced read: "considering how much damage to confidence has now been inflicted, one must also entertain the possibility that the intensification of market tensions and/or deterioration of economic activity reinforce each other feeding domestic political and social pressures precluding a final agreement among EMU member states from being reached. In this case, rather than being the ‘forcing mechanism’ that drives agreement, the economic and financial environment could feedback into the political process in a negative way, leading to a vicious downward spiral and, ultimately, to the failure of the Euro project." Simply said "an alternative scenario of a ‘break-up’ of the Euro area certainly cannot be ruled out", which leads to Goldman's conclusion: "For the same set of reasons, as the ‘end game’ approaches the rally in AAA-rated Euro area sovereign bonds (Germany’s especially) no longer seems sustainable and could reverse in coming weeks. In our base case of more intrusive control on future deficit financing, the core countries will, in exchange, have to shoulder a greater part of the legacy credit risk of their peers if they want to keep EMU alive. In a ‘break-up’ scenario, the creditor ‘core’ countries will be confronted with a wave of insolvencies, which would also worsen their fiscal position. And in the middle ground between these two outcomes, where we currently stand, the ECB will be intermediating growing intra-Eurosystem imbalances. Through this monetary channel at the heart of EMU, the ‘shadow’ credit risk of the core countries is already rising, and at an increasingly rapid pace." As expected, it appears that Goldman sure will like occupying those European bank HQs for about $1 in equity.