Europe Goes Full Bailout Retard: EFSF Rescue Capital To Be Officially Double-Counted
Europe has officially entered the Tropic Thunder zone, where one, forget one thousand , monkeys armed with one simple solar-powered calculator, can come up with a better plan than (JP Morgan-advised) Europe. Because as we pointed out on Thursday, "nothing changes the fact that with €100 billion set aside for bank recaps, a woefully low number and one which will do nothing to assure investors that banks have sufficient capital, there is still not enough cash to "guarantee" all future issuance" - well it appears that Europe finally did the math which led us to conclude that the EFSF is DOA. So what is Europe's solution? Why double counting aid already pledged of course: "EU bank plan may include aid already pledged to bailout states-sources." Uh, what? "A drive to lift bank capital across Europe by up to 110 billion euros ($153 billion) is expected to include the roughly 46 billion euros already pledged to Ireland, Greece and Portugal to help their lenders, EU sources told Reuters....Another official confirmed the intention to count money already earmarked for banks in Ireland, Greece and Portugal in any recapitalisation plan. "The problem with shock and awe numbers is that it implies that the money is there," said one official, reflecting on ministers' reluctance to set public goals for recapitalisation. "But governments don't have the money."... Just as was repeated here over and over and over and over... And yes, that red stuff shooting out of the place where your head was a few second ago, is blood. It is now Europe's official "plan" (for at least the next 2-3 hours) to use mystical, magical money, which is somehow double-counted to bail out both a bank and a country at the same time...
If over a third of the EU's bank recapitalisation drive, which investors hoped would inject more than 100 billion euros of fresh money, is accounted for under old bailout programmes markets are likely to react with disappointment.
It would effectively shrink the overall package, designed to protect EU banks from the fallout of a Greek default and ease their borrowing difficulties amid a creeping credit freeze, from more than 100 billion euros to something around 60 billion.
It would also rest the burden for EU bank recapitalisation in large part on Spain, Italy and France, which one official said together accounted for roughly 45 percent of the overall shortfall found in recent checks of EU banks by supervisors.
The matter is due to be discussed in the run-up to Wednesday's second summit of European leaders and countries may yet change tack to increase the planned boost for banks.
Well, it's official: the lunatics have taken over the Titanic.
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