Europe Leaks It Will Fix Crushing Debt Problem With €940 Billion Of More EFSFESM Debt

Tyler Durden's picture

We were delighted to see that the old headline scanning algos are still in charge of the FX market following "news", which were not even news, having been expected by absolutely everyone, that the EU is about to propose an expansion of Europe's bailout fund to a total of €940 billion for one year, by merging the €440 billion EFSF and €500 billion ESM - leading to a very transitory spike in the EURUSD. From Bloomberg: "European governments are preparing for a one-year increase in the ceiling on rescue aid to 940 billion euros ($1.3 trillion) to keep the debt crisis at bay, according to a draft statement written for finance ministers. The euro-area finance chiefs will probably decide at a meeting in Copenhagen March 30 to run the 500 billion-euro permanent European Stability Mechanism alongside the 200 billion euros committed by the temporary fund, a European official told reporters earlier today in Brussels. Beyond that, they are also set to allow the temporary fund’s unused 240 billion euros to be tapped until mid-2013 “in exceptional circumstances following a unanimous decision of euro-area heads of state or government notably in case the ESM capacity would prove insufficient,” according to the draft dated March 23 and obtained by Bloomberg News." Three  things here: 1) Of the bombastic €940 billion in headline bailout money, only €300 billion or so will actually be available (sorry PIIGS - you can't bail out the PIIGS, also a third of the EFSF money is already tied up); 2) Europe is already preparing for the fade of the impact of the LTRO, which as pointed out earlier, has not only peaked, but courtesy of the LTRO stigma, which we suggested months ago to trade by going long non-LTRO banks and shorting-LTRO recipients, is starting to hurt all those firms who thought, foolishly, that the market would not go after them. They were wrong. And now Draghi is also boxed in an runaway inflation corner. And 3) Europe is back to the old mode of thinking that more debt will fix debt, even as the banking sector is forced to delever ahead of Basel III and due to shareholder requirements. This simply means that the eye of the hurricane over Europe's sovereign debt is about to pass. Those who miss 7% yields on BTPs won't have long to wait. Reality is once again starting to reassert itself.

More from Bloomberg on Europe's reversion to desperation.

An increase in the aid ceiling wouldn’t make the entire sum available upfront. It would require a capital call in an emergency to mobilize the ESM’s entire 500 billion euros before mid-2014.


Assuming that the temporary fund, the European Financial Stability Facility, expires in mid-2013 without making further commitments, the permanent aid ceiling would revert to 700 billion euros, according to the draft. The ESM’s provisions allow the finance ministers to raise or lower its capital at any time.


Discussion of the lending cap will coincide with a possible further speedup of the capitalization of the permanent fund. The first of five planned annual payments will be made in July and the second in October, the draft statement said.


The remaining payments may also be accelerated, with two in 2013 and the final installment in the first half of 2014, two years earlier than previously planned, the statement said.


As a result, Europe would be capable of making a theoretical three-year aid pledge of 500 billion euros on July 1 and having enough money to follow through, the European official said.

Finally, if Europe is so unstable that it takes a simple Willem Buiter report to remind that "nothing is fixed", it is only a matter of time before the €940 billion EFSFESM is doubled and then doubled again. Temporarily of course.

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battle axe's picture

Print and print and print and print....

Arnold Ziffel's picture

Another trillion should make for some nice Q2 banker bailout bonuses.....

Vampyroteuthis infernalis's picture

A few hundred billion here, a few hundred billion there. Blah blah blah...... Soon it will be a few trillion there and a few trillion there.

monkeyboy's picture

Haha! The headline says it all. Classic!

RollinsArline3's picture

my classmate's sister makes $67/hour on the laptop. She has been without a job for 6 months but last month her pay was $20212 just working on the laptop for a few hours. Read more on this web site .....

Theta_Burn's picture

If the money they "printed" were actual bills, they would be 16" deep on the entire planet..

Everybodys All American's picture

and CNBC wonders why no one wants in the stock market?

Jim in MN's picture

I think they need a new firewall:


Super Heavy Euro Emitting Satanic Helicopter



Jim in MN's picture

In other cheerful news, radioactive bamboo shoots and fishing bans in post-apocalyptic Japan...both fairly far from the Fukushima plant.

Bamboo shoot contamination detected

More radioactive contamination has been found in farm products for human consumption about 200 kilometers from the Fukushima Daiichi nuclear plant. Fishing ban due to radioactive contamination
Radioactive contamination from the Fukushima nuclear accident is forcing fishermen in a neighboring prefecture to suspend catches of one of their fish.
Theta_Burn's picture

Those poor ppl

The coverup going on over there is a crime against humanity

sabra1's picture

Canada just signed a new trade agreement with Japan! see, all is well!

Arnold Ziffel's picture

Some organic farms in Oregon have shut down due to "worrisome radiation levels."

Vampyroteuthis infernalis's picture

I am from Oregon and rather doubt the radiation is that high there. The hippies are going bankrupt and don't want the truth be known.

Non Passaran's picture

I see - those are the green shoots Benny was talking about a while ago!

fuu's picture

EFSFESMLTRO and bingo was his name-o.

KMS's picture

What the fuck... *sigh*

digalert's picture

euro-area finance chiefs

Shouldn't that be 'chefs' as in cook or hamburger flipper?

StychoKiller's picture

Mmm, pink slime™ -- a thousand and one recipes!

LongSoupLine's picture

Silver and Gold.  Period.

orca's picture

"following a unanimous decision"
Good luck with that

NotApplicable's picture

Nobody saw this one coming. o_O

It is a bargin my friend's picture

Talking of bollocks reporting anyone see Liesman saying that ALL the American public have bought into Gold when in fact....wait for it....they should be buying equities .

It was the first time Ive heard this American public line on Gold...are they worried about something?

StychoKiller's picture

Sorry, but has NOT morphed into yet.

oogs66's picture

what a load of crap!

q99x2's picture

No not reality. How can there be anything. No more pretend and make better. not reality no real no pretend more. no. I don't wanto to play.

WoodMizer's picture

exponential shit pile growth.

One day decomposition is going to catch the whole pile on fire. 

Its_the_economy_stupid's picture

gonna get heavy on friday...can't wait.

Winston Churchill's picture

Supercalifragilistic acronyms.

Nobody For President's picture

OK, we're down in this hole. How to we get out, sir?

Keep digging, you assholes!

DavidC's picture

King Canute had his throne taken to the sea to show his sycophantic courtiers that a mere mortal could not hold back the waves - seems these EU bods could take a lesson or two from that.


Zero Govt's picture

Commence salty cold water drowning of Eurocrat clowns in 3, 2, 1...

Zero Govt's picture

Er right so the shocker EU policy initiative is throw (yet more) money at the problem

so let's round-up the wonderous creativity of political policy 'solutions'

debt problem: throw money at it

liquidity problem: throw money at it

housing problem: throw money at it

healthcare problem: throw money at it

economic problem: throw money at it

agriculture problem: throw money at it 

it's so easy this Govt lark, why do we need politicians, just get a fucking parrot