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