Morgan Stanley Says Europe's Pandora's Box Has Been Opened

Tyler Durden's picture

Have a sinking suspicion that the way the Eurozone has handled the past week's Greek threat has set the stage for the collapse of the Eurozone (here's looking at you Italy, over and over) now that Merkozy has made the possibility of a country leaving the Eurozone all too real? You are not alone: Morgan Stanley's Joachim Fels has just sent a note to clients in which he not only commingles three of the catchiest and most abused apocalyptic phrases of our time ("Emperor has no clothes", "Water Pistol not Bazooka"  and "Pandora's Box") he also warns, in no uncertain terms, that "by raising the possibility that a country might (be forced to) leave the euro, core European governments may have set in motion a sequence of events which could potentially lead to runs on sovereigns and banks in peripheral countries that make everything we have seen so far in this crisis look benign." And when a major investment bank, itself susceptible to bank runs warns of, well, bank runs, you listen.

Full note (highlights ours):

The Emperor has no clothes. This coming week markets are likely to continue to grapple with the notion that the ‘comprehensive solution’ presented after the EU Summit on October 26 is neither comprehensive nor a solution. First, bank recapitalisation was always about curing the symptoms rather than the disease – sovereign risk. And by giving banks until mid-2012 to meet the capital ratio target, governments have likely set in motion a wave of deleveraging that could have severe economic and market consequences. Second, the leveraged EFSF may still turn into a bazooka, but so far it looks more like a water pistol. We continue to doubt that investors will find the insurance and SPIV constructs appealing, and as the G-20 meeting this Thursday and Friday made clear, non-European governments also stand to be convinced that co-investing with the EFSF make sense. But perhaps euro area finance ministers will unveil some more reassuring details on the construct after their meeting this Monday/Tuesday – don’t hold your breath though. Third, the Greek political saga continues and even though the prime minister won the confidence vote in the early hours of Saturday, the second bail-out and debt restructuring package still needs to be approved and likely new elections late this or early next year could spring additional uncertainties. And fourth, but not least, while the ECB cut rates on Thursday, ECB President Draghi made it clear in the press conference that the bond purchase  programme remains temporary and limited (see the quote of the week below), suggesting that hopes for large-scale monetary financing remain just that, at least for now.

 

Another Pandora’s Box opened? However, my main takeaway from last week and my main worry for the weeks and months ahead is that Chancellor Merkel and President Sarkozy, in response to the idea of a Greek referendum on the bail-out package, raised the possibility of a country leaving the euro – so far a taboo in European political circles. This is the second time in less than four months that European leaders could have  opened a Pandora’s Box: on July 21, the decision to involve the private sector in the Greek bailout signaled that euro area government debt is no longer risk-free and thus sparked massive contagion into Spanish and Italian debt markets. This past week, by raising the possibility that a country might (be forced to) leave the euro, core European governments may have set in motion a sequence of events which could potentially lead to runs on sovereigns and banks in peripheral countries that make everything we have seen so far in this crisis look benign. But maybe I’m too pessimistic after another long week.

And what is even more disturbing is that Germany itself is now demanding a referendum. According to Welt, 71% of Germans want a referendum, and want to to vote directly on important decisions for Europe and the Euro. Only 27% oppose the motion. And the same poll has found that 63% of Germans think Greece should be kicked out of the Euro, with just 32% believing the country can still be saved.

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silver500's picture

I knew the rate cut would work.

Smithovsky's picture

MS is looking to get long.  

Mr Lennon Hendrix's picture

Is that like, "Getting sexual"?

I want to get long, baby!

Chris Jusset's picture

Every day is a NEW Eurozone crisis.  Every day Merkel and Sarkozy declare that they're on top of the latest crisis ... and every day the ongoing crisis gets just a little bit worse.

While this has a great deal of entertainment value, it is, nevertheless, really becoming tiresome ...

kito's picture

As long as merkel doesnt open her pandoras box. It would be very fishy......

Spastica Rex's picture

If it's Panodra's box, how did Merkel come to possess it?

kito's picture

Its that whole x y chromosome thing. Didn't you take sex ed?

LMAO's picture

I mean WTF?! We all know by now the Greek are broke, ergo;

Pandora's Box is empty!

vocational tainee's picture

A greek default would trigger a row of CDS,that could finish UK and american big financial players....

Barbar's picture

why don't they just sell the islands?

Mr Lennon Hendrix's picture

I think you mean,

Why don't they sell the rest of the islands?

LeonardoFibonacci's picture

Treasonist cowards at MS with their constant manipulation. 
Erect the gallows.  Once a century or so, it becomes obvious its time to use them again.

secretargentman's picture

To repay debt in a fiat currency??

 

Why don't they just tell the Euro banks to go get stuffed?

jekyll island's picture

The Greeks are like the family member that comes to your house, eats your food and drinks your beer and never leaves.  What would be the downside to throwing these losers out of the EU?  Don't give me that contagion BS, they are who they have always been.  Why keep the albatross around your neck?  

 

 

KickIce's picture

How many more are just like Greece?  Probably worry about the Domino effect and the CBs want them under their thumb.

JohnG's picture

 

 

You are describing "Borderline Personality Disorder."  Seems to fit.

Spastica Rex's picture

It's part of the illusion. Everything starts to unravel when the sleight of hand begins to fail.

MUST. MAINTAIN. ILLUSION.

the 300000000th percent's picture

"The Greeks are like the family member that comes to your house, eats your food and drinks your beer and never leaves.  What would be the downside to throwing these losers out of the EU?  Don't give me that contagion BS, they are who they have always been.  Why keep the albatross around your neck?"  jekyll island

 

Because the only problem is that while they were at your house they also managed to borrow a shit ton of $$$$$$ 

The Big Ching-aso's picture

I think Pandora's Box here smells like rotten tuna.

Jump The Shark's picture

This is good for the dollar for today right? I'm do confused.

paarsons's picture

It should be.

But who knows.  Everything is fucked up.

http://fucklloydblankfein.blogspot.com

KickIce's picture

if everything goes true to form there will be bank runs and PMs will drop because the dollar is gaining "strength".

achmachat's picture

This is impossible.
It's sunday.
On sunday the world stops. Even God rests.

Smithovsky's picture

Do people with IQ over 90 believe in God?  

GeneMarchbanks's picture

Are you asking out of curiosity as someone from the sub-90 club?

Smithovsky's picture

I stopped believing in fairy tales and Santa Claus a long long time ago.

Burnbright's picture

Define God for me. Most people don't actually understand the difference between a deity, God, and the fact that most religions worship deities, not God.

Smithovsky's picture

Deity, God, Harry Potter, schizo's imaginary friends - it's just semantics.  

Burnbright's picture

You're avoiding the question because you don't have an answer. If you can't tell me the difference between God and a deity then you don't know wtf you are saying exists or doesn't exist.

Hot Apple Pie's picture

He's not answering because it's clear you're itching for a semantic argument as opposed to just accepting that an Atheist doesn't give a shit what you call your imaginary friend. Does a 7-year old care about the difference between Kris Kringle and Santa Claus? No, because they're both made up.

fockewulf190's picture

Smithovsky isn´t answering because currently Hot Apple Pie is in control of the joint brain they both occupy.  If your going to use an alter ego, please use the brains God gave you and seperate the creation date by more than one day. 

Burnbright's picture

He's not answering because it's clear you're itching for a semantic argument 

The word "semantics" itself denotes a range of ideas, from the popular to the highly technical. It is often used in ordinary language to denote a problem of understanding that comes down to word selection or connotation. -wikipedia

And what is your point? He doesn't understand the difference between God and a deity. Is it an issue of semantics? Of course! but it is in how we draw meaning that we truly understand. All arguments are about semantics, so your point is entirely moot. Look at how I use the word God. I never speak of God in any context that would derive another person to believe I was refering to a "being", so why tell me I beileve in imaginary friends? It is obvious that you are associating God with deities. 

Does a 7-year old care about the difference between Kris Kringle and Santa Claus? No, because they're both made up.

Once again semantics isn't about two people using a diferent word to describe the same thing, semantics is about two people talking about the same thing but using entirely different meaning. Your analogy fails, Chris Kringle is Santa Clause, God does not exist as finite being hence the comparison to a deity is rather uneducated.



fnord88's picture

I beleive in GOLD. Is that close enough?

espirit's picture

I believe in DOG.  He's my best friend -and- a reserve food supply.

Fixed it.

guiriduro's picture

Quick search on wikipedia : deity comes through the Latin languages and god from the Germanic.  We might not be having quite the same discussion if we were spanish, for example (dios and dios.)  God's existence is a given, if god is available to think then it is (much like I am, cogito ergo sum), at least as an object of thought and therefore an existence as such.  Even an atheist would have to agree with that ;)  God exists in at least the same way unicorns do.  But I don't suppose that was the answer you were looking for?

sunny's picture

KEEP HARRY OUTTA THIS ARGUMENT!!!

sunny

Mariposa de Oro's picture

If you've stopped believing in fairy tales, then why did you vote for Hope-N-Change?

HoofHearted's picture

Apparently you need an IQ under 90 to disbelieve...see Smithovsky, for instance.

This is all silly. It has nothing to do with IQ and everything to do with whether you think you are the biggest thing in the universe or if there is something bigger out there. Never mind...maybe it does have to do with IQ, ridiculous test that it is. (And before you start with your blathering about my IQ, it's several standard deviations above the mean.)

infinity8's picture

Any human who doesn't realize there are bigger things/beings in the universe than his/herself is at least a little retarded. To say that something "bigger" must be "god" is also a little retarded, logic-wise.

smlbizman's picture

when we see the deception of man daily along with historical barbery....how could you not at least question the whole religion, fear god thing...the richest motherfucker on the planet is "god"...if sweet ole warren is a crook what is god?

sabra1's picture

99% believe in God!

1% believe in the devil!

the tower's picture

God was invented by men, there is no god, simple as that.

Are we part of something bigger? Evidently, but we don't need a god for that.

God was invented to gain power, like money.

 

Period.

GeneMarchbanks's picture

Then why go through all the trouble to capitalize?

Burnbright's picture

God wasn't invented by men any more than evolution was. Men simply personified God because people like to think they are God.

Burnbright's picture

Seriously!? I get five junks from people who can't read.

junkyardjack's picture

God was created by man on mushrooms. Joe Rogan Experience Bitchez!

TheFourthStooge-ing's picture

God was seen by man on mushrooms (or, if you prefer, LSD).

 

Glass Steagall's picture

"If God dropped acid, would he see people?" ~ Steven Wright