Via Peter Tchir of TF Market Advisors,
Holding 10, Queen, not suited, small stack, is it time go all in?
Both EFSF and ESM rely primarily on guarantees which we know Most European politician think is as valuable as toilet paper, so why not provide more? The ESM does have some paid in capital, but the plan is for minimal paid in capital and maximum usage of guarantees.
With the momentum from LTRO why not throw all in? 10, queen not suited isn't the worst hand and if the blinds are going to kill you in the end, why not try? You might win.
This talk is mostly just that. It is all guarantees. It is the hope that it takes all pressure off the market. There is no shot of raising all the capital. It is a distraction from their failure to leverage EFSF or to get new (non European bank) funding from the IMF. It's not a solution, barely even feasible. Maybe they will catch some economic growth on the flop but without some luck this may be just one more step towards the endgame. I would expect some of the players - Finland and Holland in particular, to pick up their remaining chips and walk away from this ploy.
In the end there are only a couple of guarantors that matter and the rest is circular and even the viable grantors might not be able to produce the money if it's needed (at least not until the ECB gives it to them).