It Just Went From Bad To Far, Far Worse As Germany Says Italy Is Too Big For EFSF To Save, Refuses To Carry Euro Bailout Burden

Tyler Durden's picture

Remember when we said (yesterday) that Germany will soon balk over the fact that it is pledging its entire economy to bail out an insolvent Europe? Well, that moment has come.

Dow Jones just hitting the tape referencing Spiegel

  • German Govt: Italy Too Big For EFSF To Save - Spiegel
  • German Govt: Doubts Whether Tripling EFSF Would Help It Save Italy
  • German Govt: Italy Must Make Savings, Reforms To Exit Crisis - Spiegel
  • Italy Debt Guarantee Could Raise Doubts Over Germany's Finances - Spiegel
  • German Govt: EFSF Should Only Help Small, Mid-Size Countries - Spiegel

As a reminder, yesterday's stopgap announcement by the ECB to expand its SMP purchases of secondary market Italian and Spanish bonds was merely as a precursor to full EFSF monetization until its comes fully online in September (or sooner) in a vastly expanded format (between €1.5 and €3.5 trillion).

If Germany is now against this, which appears to be the case, it pretty much means, well, game over.

Add the uncerainty over the unwind of the Europe rescue "gamechanger" as one of the more naive CNBC anchors said yesterday, and Monday is now guaranteed to be a bloodbath.

As for those saying China will gladly step in and fund a $5 trillion EFSF shortfall, they may want to read the following article from Reuters:

Italian Economy Minister Giulio Tremonti said on Thursday that Asian investors are reluctant to buy Italian bonds because it sees they are not being bought by the European Central Bank.


Speaking at a news conference, Tremonti also said it would be desirable for the central bank to follow the lead of the Japanese and Swiss central banks in taking expansionary steps to tackly the euro zone's crisis.


"I note that the Bank of Japan today launched quantitative easing and the Swiss cen bank cut rates to zero, we are waiting for decisions if possible, but desirable (from the ECB)," Tremonti said.


When you talk to Asia they say: "We don't understand what Europe is," he continued. "The second point is that they say 'if your central bank doesn't buy your bonds, why should we buy them"?

P.S. Time to unwind that Bund short we suggested yesterday. In fact, if true, it is time for a big rush to safety.

h/t London Dude Trader

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LawsofPhysics's picture

Ha ha.  More puts for Monday?

Ahmeexnal's picture

but...but...."the euro is freegold"

gmrpeabody's picture

And the jokes just keep on coming...

It's a laugh a second...

Please, give me a second to catch my breath!

Havana White's picture

That twit "Simon" on cnbs was the one repeating "Gamechanger!  Gamechanger!" when news that Europe's troubles were over hit the tape and the Dow charged back from -200+ and still falling fast.

This "deal off" (in effect) news will play a more important role in Monday's tapes than many will recognize, as the Treasuries downgrade will dominate the news.

So, here's the beginnings of the "domino effect."  Monday could be a very ugly day.

(Disclosure: short all over the place.)

TruthInSunshine's picture

Shit - finally, FINALLY - just got real, yo. It's finally on like Donkey Kong, bitchez (it's all been planned to some extent, but losing control does happen no matter how prepared they think they are):


Sun, 07/24/2011 - 15:47 | TruthInSunshine

Merkel knew this was coming, as does Sarkozy.
There have been many trial balloons floated by the EU as to who will bail out whom, when and how...
...ignoring the issue that absent massive printing of trillions in euros by the ECB, which is what must happen if the EU is to avoid sovereign defaults (Greece, Portugal and Ireland, together, are a fraction of the debt in jeopardy represented by Spain, let alone Italy...or....yep - France [I'd bet few know how awful France's own internal economic problems are]).
That's the problem. It's not that anyone necessarily wants to see anyone do badly in the EU, but saving those in trouble for the sake of holding the EU together is akin to placing a surcharge on Arizona, New Mexico and Washington State in order to bail California out.
Good luck to the governors of AZ, NM & WA if they were to do that.
A flood of EUR will either be produced in very short order or there will be defaults.
And Merkel is toast. She can't have her bratwurst (trying to represent Germans) and eat it to (imposing burdens on Germans so as to make PIIGS+UK+?France? bond holders whole - if even in devalued EUR).


bankrupt JPM buy silver's picture

Silver bears called this weekend on Friday at 3pm est when the vid was launched.  Epic.  Enjoy.

Ahmeexnal's picture

Soros is about to break the BoE.


narapoiddyslexia's picture

This blog post is a little alarmist, as Der Speigel only states that German government "experts" say that the Italian debt is too big. As we have learned, no debt is too big. I think this is a warning shot across the bow, and Berlosconi has it within his power to avoid the consequences.

Moreover, from what I've been able to read from around the world, little is going to change on Monday morning, except that the Sun and gold will both rise.

Juan Wild's picture



Moreover, from what I've been able to read from around the world, little is going to change on Monday morning, except that the Sun and gold will both rise.

Well, there was no news Wed evening. As a matter of fact all futures were in the green. Thursday the sun and gold rose......then....

narapoiddyslexia's picture

That's a good point, but I guess the Sun and gold always rise in the morning. At least for the last 10 years. . .

BaBaBouy's picture


Looks like Merckel may have Found her Balls ...

ToNYC's picture


Get your facts straight please. The Sun never rises; the earth rotates on its axis and happens upon the life present. Gold  never rises either; the number may increase, however the dilution negates even that. Gold comes from a hole and then returns to a hole and one never need care for the confidence meter stick that it represents.

IMF, BIS, Fed, BOJ, SNB currency swaps complete the global conundrum. Make Peace with your devils and make your local arrangements.  That is the best currency that avoids it.


narapoiddyslexia's picture

Ok, then. The Earth always rotates, and the dollar always sinks.

Same result.

DaveyJones's picture

"but losing control does happen no matter how prepared they think they are"

you said it and I'd feel good about their disappointment if we all weren't so screwed

Zero Govt's picture

TruthinSunshie, "Mekel is toast"

Yes indeedy. CNBC's German talking head, Helga or Hatti (!), said couple months ago the threat German taxpayers would vote against continued German Pro-EU bailouts was "dreaming". She then stated as matter of fact all of the German political parties were Pro-EU and none were anti-bailout so German voters had no choice in the matter (ie. same old Multi-Party = 1 Party State we see everywhere).

She then enthused the EU must remain together, there is no alternative... of course not Helga/Hatti, we must keep idealism alive and kicking no matter what cost and how stupid it is... our Western institutions are afterall based on vacuous ideaology rather than productivity


Fazzie's picture

Your avatar should preclude the need for the disclosure.

bayoutrader's picture

Allow me to use your post to comment that the addition of Cramer was the last straw. Rick Santelli more than offset Liesman and the other fools as well as dropping Art Cashin's comments. But adding Cramer is an insult to any educated person. If Bloomberg or Fox business would team Jeff Macke and Rick Santelli for an hour before and an hour after the open CNBC would be history.

Pure Evil's picture

I don't get it.

They were hell bent on taking over Europe back in the 30's and 40's.

And, now that they have the chance again without firing a shot, they draw up short like Little Timmah on a Friday night out with the girls.

At least Hitler and his henchmen knew how to 'Dream the Impossible Dream'

narapoiddyslexia's picture

Looks like The Big O is startin' to dream big.

Travel Warning
Bureau of Consular Affairs


August 5, 2011

The U.S. Department of State urges U.S. citizens in Syria to depart immediately . . . 

jonjon831983's picture

Let's not invoke Hitler in this... don't think the current German gov't is a bunch o Nazis...

Anyways, why take over now when everybody is just starting to panic and rushing for the doors?  Why not let them feel the fear and desperation for a while? Then start backing up the truck when things are much cheaper so they are more maleable and ever more desperate to accept assistance?  That is how lasting peace is made, when you are accepted with open arms.

Silver Dreamer's picture

Nope, they're just national socialists like Mr. Obama.  There's nothing to be concern about.  Move along.  Didn't you get the memo?  They haven't been called "Nazis" in a long time.

TK7936's picture

If they and Obama are anything then its Marxists, definatly not National socialists.

Pay Day Today's picture

Nope, the people who run the US are not Marxists. They are certainly not socialists. They are kleptocrats.

THE DORK OF CORK's picture

This makes freegold more likely as the Fiscal authorties are saying Fuck off we don't want this shit.

Therefore its up the CB....................... if they back down then its even more dollars all the way $$$$$$$$$$$$$$$$$$$$$$$ & dollar Bitches win again.

zorba THE GREEK's picture

I picked a hell of a week to stop sniffing glue...but it gives me a warm fuzzy feeling being all in PM's

Id fight Gandhi's picture

You'd think, but the rigged fed market will likely pump emergency POMOs and start qe3 as soon as next week if things keep getting worse.

Hey it's election season you know...

Pure Evil's picture

Monday will just be one more drop in the barrel of excuses that the FED will use to announce QE3 at some later point. Does anyone really believe that the FED has stopped any/all POMO operations?

Announcements like QE3 are for the sheeple only. It makes it more palatable for the little people that have been brainwashed to accept ever more government programs that has been going on since the days of Hoover/FDR.

The Bernank is itching to start QE3 and will do anything and everything to manufacture a crises that can be taken advantage of.

tictawk's picture

The FED is not the market.  Nobody is bigger than the MARKET.  The emperor has no clothes and SnP had the balls to point it out in a small way.  We ARE INSOLVENT.  Think about it.  The Fed PRINTED hundreds of billions to bailout the markets.  And the deficit spending continues unabated.  YOU CANNOT PRINT WEALTH, you can print currency but WEALTH has to be EARNED. 

Taku's picture

QE3 won't work.
It would only say they won't allow markets to go down.
The sheeple have learned.

If QE3 plays, there could be 100% of Americans on food stamps, yet markets would still go up.
QE3 = hyperinflation, as it means QE4, 5, N.

...and if they do QE3, then I predit that QE6 hits in time for the iPhone 6 release.

j0nx's picture

Good luck passing that inflation on to your salary in a world filled with people who will do your job for 1/20th of your pay. When this is good and going you will wish for the good old days of hyperinflation. We get what I refer to as hyperbiflation. Ridiculously exploding commodity costs, stagnant or dropping wages and things you own dropping in value. On the bright side the things you want but don't need will be cheap but you will be too broke from buying food and gas and being taxed to give a shit about those things. Hope you bought ammo, guns, dried food, potable water and PMs.

granolageek's picture

Naah, bought a farm, got to know the neighbors. Everybody bought a little ammunition, nobody had to buy a ton. And it works on coyotes too, which we have right now today.

Also, being a geek rather than a money moron, I'm watching the corporate slimeballs trying and failing to replace me for a tenth my hourly rate, let alone a 20th. They actually can't beat a fifth, plus paying overhead for getting third shift workers.

OMG, they're in danger of paying me a living wage.

bankrupt JPM buy silver's picture

If QE3 doesnt work....what will?

Juan Wild's picture



QE only helped Wall Street. That's all. In the end it will kill Wall Street too. But not before the whole world is in a deep depression. So why the hell is everyone hoping for more QE? So fuckin' AAPL can go to $900? While everyone else is moving into cardboard boxes? Just what the flying fuck is going on here?

I did it by Occident's picture

Bet all those people will be sporting the newest iJunk, no matter they have no food, they have aapls to eat.

I did it by Occident's picture

Bet all those people will be sporting the newest iJunk, no matter they have no food, they have aapls to eat.

Smiddywesson's picture

What is going on here is they are destroying all fiat and stacking gold for the end of the can kicking.  That will also destroy the value of all the loans the banks have, but I expect them to step in and replace all our paper before the USD hits zero, or try to engineer some legal trick to keep us on the hook.  Anyway, they benefit from inflation as long as they can keep inflating slowly, because they are the only ones who can outrun it.  If we get run away hyperinflation, the banks still win because they will hold all the gold.  If we don't, and we keep kicking the can and inflating slowly, the banks will be better prepared for the end.  Either way, they win.

They will do anything in their power to slow down the collapse.  It allows them to stack more gold, call in more loans, and to make more money off of inflation.

Wouldn't it be typical if the USG taxes as income any balance of your mortgage you escape due to the destruction of the currency?  I wouldn't be surprised.

Sudden Debt's picture

I'm beginning to doubt.

A QE could very well have a totally different effect as QE2. It might really implode the stockmarkets all over the world.

Unless QE3 will be hughe, and by hughe I mean AT LEAST 4 TRILLION because once they start a QE3, China will be dumping and Russia as well.


It was pretty clear friday that you just needed to get out of the markets. The "analysts" said that it will rally but the chance of bad news was to high.

Bad news won...

Monday, there'll be a lot of markets going to close down!




2. Europe, US


DoChenRollingBearing's picture

Sudden, you raise an interesting point.  For  hours since the S&P US Downgrade I have been looking at various articles here at the Hedge.

The interesting thing is, there is essentially NO CONSENSUS I have been able to find!

Markets CRASH and CLOSE or not?

Treasuries UP or DOWN?

Gold UP or DOWN?


Will something BIG happen?  Or nada?

Uncharted waters here, even the longest veterans I see commenting don't know either.  I have NO IDEA what is going to happen, but I will be manning my Battlestations starting Sunday night (US ET) to see what Asia sez...

SJGR, Bitchez!

Rodent Freikorps's picture

Maybe all the above. The US has never been downgraded before. We are off the map. There be monsters.

I think the old hands will try to whistle past the graveyard, but the herd will choose what happens. Try to be first to see what direction is begins moving as a single mass.

Sancho Ponzi's picture

DoChen: If history is a guide the downgrade will be a non-event. Japan's soverign credit rating was downgraded by S&P to AA- earlier this year, and little changed. 

Terminus C's picture

Yes but... Japanese debt is owned by the Japanese people who will likely care little about what an American rating agency says about them and will likely have believed their government when they said "nothing to see here, move along, move along." They believe their government for Fuku ffs, a downgrade would be peanuts to a propaganda machine.

U.S. debt is held, in large part, by foreigners and they will care what a U.S. rating agency says about them.

Quixotic_Not's picture

There be monsters.

Sums it up nicely...

I've been saying this, more or less, for about 15 years...

Downgrading the U.S. debt should have actually happened about 2008 Q4, guess those relying on Fraud St. to give them info missed the boat, in comparison to those of us that ca$hed out of U$D for PMs LONG before!

Let them eat cake indeed!  LOL

Sudden Debt's picture

I've never said this in a weekend... BUT I WISH IT WAS ALREADY MONDAY! :)


It's pretty simple actually. Banks buy US AAA bonds to back thing up. Collateral.

Now this collateral isn't that secure anymore. Whaterver the seller says, the rating DOES matter.

SO: Some owners will need to sell and look for other collateral. YES PM'S will do! But not paper, and the price is set through paper so there is the PM problem.

There will be A LOT OF FUNDS who will need to back their portfollio up with gold up to 10%!

Currently, THEY HAVE 0,1% in gold assets! I've already posted this a few weeks ago.

Gold could go X40 and silver X160 because of this within 3 years. (2015 is the doomsday for a lot of western countries)

AND THEY WILL START TO ADD PM'S TO THEIR PORTFOLLIO but not the paper, so once the price will start to rise it will go really fast. And only after the paper markets go bust. And that will also happen. When? I don't know but it will.

And this is the main reason why PM's are so cheap right now.


Second for PM's:

If you had 5 billion you wanted to buy gold and silver with... it would take you quite a long time to do so!

500 million in silver of gold isn't a piece of cake. That's pretty hard, imagine doing the 5 billion.


Well: They own about 35 trillion. 10% of 35 trillion, is 3.5 TRILLION IN PM's!!!


Gold 60000$

Silver 4500$

And that's without the inflation.

So what everbody needs to do is: PUT AT LEAST 10% OF YOUR PORTFOLIO IN GOLD OR SILVER.

Like you where told to do at school but nobody ever did.