Excerpts From EU Report Stating Euro Crisis Contagion Has Spread And Is Now Systemic

Tyler Durden's picture

The latest headline is in, and judging by the swoon in the EURUSD it is not pretty. Sure enough, this one has nothing to do with the Coneheads coming to rescue the world, and everything to do with an EU document which says that the shit is about to hit the fan. Yep: the EU is now holding the gun against its head and threatening to shoot. Furthermore, the document warns ministers this week about the threat of a renewed credit crunch as a "systemic" crisis in sovereign debt spills over to banks, according to EU documents. In one a series of bluntly worded reports prepared by officials for a meeting of EU ministers on Sep. 16 and 17, they warn: "While tensions in sovereign debt markets have intensified and bank funding risks have increased over the summer, contagion has spread across markets and countries and the crisis has become systemic."

Selected highlights from the documents via Reuters:

This highlights a "risk of a vicious circle between sovereign debt, bank funding and negative growth".

In the documents, the influential Economic and Financial Committee, which prepares the agenda for discussion among ministers, levels harsh criticism at countries including Spain for not doing enough to reinforce its banks following dismal results in stress tests.

One of the reports, dated Sep. 13, cautions that the "spill-over effects" could feed "a dangerous negative loop between the financial and the real sectors (of the economy), whereby funding problems and ... risk aversion ... may lead to ... deleveraging by banks, thereby generating a credit crunch, in some Member States".

Outlining what they describe as spreading contagion and a sovereign debt crisis which they say has "entered a new phase", officials highlight the difficulties experienced by European banks in borrowing.

"Despite the considerable strengthening of capital positions compared to the levels of 2008-2009, European banks have recently experienced market funding difficulties resulting amongst others from stress on wholesale liquidity markets, high spreads in secondary markets, and, for some EU banks, growing difficulties in accessing funding from U.S. counterparties," one of the reports says.

To counteract dwindling confidence in EU banks, officials recommend to ministers that "a further reinforcement of bank resources is advisable at this juncture".

They criticise some countries for not taking such measures -- which would include state-backed capital injections in flagging lenders -- after recent stress tests.

"This is important for banks that have failed the stress test, but also for those that have passed the test but with capital levels close to the relevant threshold."

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nope-1004's picture

Good thing Geithner is going over to Europe to help the situation.  The EU needs to come up with more inventive, dishonest, subversive, and diabolical ways to keep the ponzi going.  Geithner is the man!!!

If any y'all been watching the PM market, you can see ongoing central bank intervention.  A default is coming.  Team Oscama trying like hell to keep a lid on PM's.


X.inf.capt's picture

its a loosing battle, 1005,

all the're doing is giving us time to buy PM's


upWising's picture

This "situational transitional rough patch" is going to take Timmy-Tim-Tim some time to completely solve AND I hear he only has enough Frequent Liar, er  FLYER miles for a One Way Ticket. Our Loss - Europe's Gain.

Drink ALCOHOL! (If a Little is Good, A LOT IS BETTER).
Watch Television! (It's ALL True!  That's why it's on Tee Vee!)
Max Out the Credit Card! (Go Ahead! QVC Yourself!  You Deserve to Gift Yourself!)
Take Your Medication As Directed!


They know what they are doing!~


Thomas's picture

We need more stress tests.

CvlDobd's picture

Is that what's driving the big spike in TLT?

alien-IQ's picture

the same thing that's driving everything up: a potent mix of kool-aid, bullshit and garden variety lies from powerful places.

in other words...the usual.

CvlDobd's picture

Ah yes. I forgot about that stuff.

edit: I forgot there was an auction of 30 years today. Must have been well bid.

NEOSERF's picture

Real enough for me...just moved my son's 529 into bond/cash

Id fight Gandhi's picture

And markets rally on

xtop23's picture

Yet another Hank Paulson moment. The bankers want theyre stimulus !!! pathetic

GeneMarchbanks's picture

To be continued... I'm not asking for much but I want to see one, just one, French bank crash and burn. I don't care if it's SocGen, Agri or BNP. You pick Mr.Market.

sampo's picture

Really, if one wants to kill himself, there's nobody that can stop him wanting to do so.

newworldorder's picture

EU leaders do not know what to do. They do not have the political mandate at each coutry level to proceed with further bailouts, while they are being pushed to do so by euro funding considerations and bankers. The apt phrase here is , "deers caught in the headlights."

alien-IQ's picture

this should send the /ES to a new high for the day because...well...just because.

Cliff Claven Cheers's picture


I am surprised this guy is still walking the earth speaking truth like that.

DirtMerchant's picture

"risk of a vicious circle between sovereign debt, bank funding and negative growth"

I think the proper term here is "swirl" which is the circular pattern shit takes as it spins around the bowl when a flush occurs....

chaartist's picture

I wonder if they r so smart, or maybe they will see it on the road. But ECB could be the largest Enron fraud vehicle in the history. They will burry there all the debts and everyone will be left with their own currency, hard one..

TheLooza's picture

These fuckers think they can get QE3 and Eurobunk without real market pain.  And they are probably right. 

dick cheneys ghost's picture

I get the feeling that the upcoming financial collaspe and events in the Middle East are set to converge at the same time...........Is this all by design?



jtmo3's picture

Fucking idiot. Have they not looked at the stock markets? Geez.

slewie the pi-rat's picture

slewie declares chubby checker week!!!!!!!!



chet atkins "unplugged": Chet Atkins and Hank Snow "Limbo Rock" - YouTube


ex VRWC's picture

'Systemic crisis' are just words they are dragging out to justify the next round of wealth transfer.  They need to start calling it that to justify themselves.

SheepDog-One's picture

Yes but last time they rolled out 'systemic crisis' was when markets fell 50%....today they can hardly contain 3% rises daily!

TradingJoe's picture

Meat grinding at its best levels ever! Until they get into that machine too!

Sudden Debt's picture

I'll miss those day where you could still wonder if there's a sollution to the problem.

Shoulda, woulda,coulda, BUT DIDN'T!


Syrin's picture

The Euro crisis has spread and is systemic ?!?!?!?    REALLY ?!?!?!


IS grass green?

IS the sky blue?

Are the Kennedys gun shy?

Sudden Debt's picture





I only SEE DARK CLOUDS so the sky is a black/grey these days

And most of the Kennedys tried to catch bullets WITH THEIR TEETH.


what's your point?



SheepDog-One's picture

And best part about the new systemic crisis is its GREAT news!

Tic tock's picture

So shoot, you corrupt fuggers

spiral_eyes's picture

Kotlikoff says the problem is over-leverage.

He's wrong.

The problem is the ridiculous, incoherent Euro system.


xtop23's picture

Thats the whole thing..... if they dont get stimulus theyll pull the financial trigger and itll be financial armaggeddon . So ? Who cares really... theyre going to do it anyway but at least if they pull it now there MIGHT be a few plebs that have a little cash .

The banks HAVE the cash on hand they're just worried about all those derivatives that are floating around out there ready to explode so they wont lend.

I guess thats the point though. We still have a little dry powder they want to squeeze so were defenseless in the later innings.

Belarus's picture

Oh....that's why all the European indices rallied hard today. It makes more sense now that it doesn't make sense at all.

baseball13's picture

The most recent rumor/non-rumor is that China will indeed come to the rescue of the EU. I think i know how it will go down...

Let's see, they have $1.5 trillion in US dollar reserves which, as they know, are practically worthless and cannot get rid of fast enough...

The EU is tight on liquidity and debt is swallowing up whole countries...the relatively well capitalized countries are shying away from EU entanglements...

The Chinese say, "Let's put these dollar reserves to good use! We'll come in and bail out the EU with our reserves! Only thing is, we will require collateralized obligations. When the dollar collapses, F %#$ them! and we'll take the collateral!"

Or will this lead to WWIII?


PulauHantu29's picture

Dow up 135 on the good news. How bad is it....really?

SheepDog-One's picture

Well buy your debt for slavery, in other words.

SheepDog-One's picture

Whatever! Its all good news apparently to tack on another +150 to the DOW in preparation for >10,000 DOW so Bernank can queef out Qeueef3 next week! WTF!

Georgesblog's picture

The currencies themselves are the disease. The liquidity shortfalls are the synptoms of fiat addiction. We are seeing the withdrawal. The patient's vital signs are not good.



Ineverslice's picture

















s2man's picture

can you say "systemic risk"?  the phrase which has permiated articles and blogs thanks to Charles Smith's Unconventional Guide to Investing in Troubled Times