With less than three months left until the Greek D-Day [9], and just over one month until the next 3-year LTRO, which will be the ECB's final chance to firewall off its banks with sufficient liquidity and brace for the worst if Greece fails to reach a consensual debt reducing exchange offer (which our colleagues [10]in the German press don't think will be nearly enough), we finally get a glimpse of how the super broke Mario brothers really feel. According to a report in the German Spiegel [11], the ink is not even yet dry on the latest completely toothless EU Fiscal Draft [12](which will allow the €500 billion European Stability Mechanism to be enacted) and already we get the world's most insolvent hedge fund, pardon central bank, and Europe's biggest debtor demanding for more. "Italian Prime Minister Mario Monti and European Central Bank President Mario Draghi both support enlarging the capacity of Europe’s permanent financial rescue mechanism, Der Spiegel reported, without saying where it got the information. The news magazine said Monti is pushing for the European Stability Mechanism’s capacity to be doubled to 1 trillion euros ($1.29 trillion), and had made the suggestion to the German government. Der Spiegel added that Draghi supports the view that unused funds from Europe’s temporary rescue fund should be added to the ESM’s firepower when it comes into force." Well good thing the ECB is not printing money or else one would get the impression that the system is getting flooded with trillions of excess cash. It also also great that the next LTRO will not be up to €10 trillion, as first reported here [13], and as was finally noted by the German press [14].
As for the reason why the Super Insolvent Mario Bros need the extra cash...
Such a measure would create trust in the monetary union, which leaves the lower interest rates on government bonds, argues Monti. This suggestion is supported by Spain and Portugal. France also argues that Germany is throwing its economic and financial power in favor of the euro in the pan. The federal government has set by his wishes Monti already aware.
Needless to say, Germany will not hear of it: after all it is its money that goes down the rabbit chute to fund Italy's deficits. But that will not stop Monti who has just conceived the most persuasive of arguments:
The Italian Prime Minister had urged that Germany should contribute so that Italy would continue to pay lower interest rates.
Poor Mario apparently fails to grasp that for Germany a plunging Euro, and thus a surging export market to offshore trading parterns, is the only thing that matters now that its endogenous mercantilist import, pardon, trading partners of the past decade, the PIIGS, have no more debt capacity to buy German exports. Although even a technocrat probably understands that one does not get a weak currency by bailing out the weakest links over and over.
Expect the European crisis to be with us for a long time. After all, that's precisely what Germany wants (of course, the Chairsatan may have other views on the matter).