A new to be released EU report warns that far more deficit cuts will be required. The report focuses on Spain and Portugal, and especially on the year 2011. According to the report a "snowball" effect may hit Spanish and Portuguese debt, and that the fiscal challenges for the two countries are "daunting." And as these kinds of reports tend to be self-fulfilling prophecies, Portuguese bonds have shot lower, and the spread to Bunds is +12.5 bps at the day's wides, or 271 bps. We anticipate many more such reports to come out about every country in Europe that has been forced to establish austerity measures, which basically means every country in Europe. And somehow the force is still strong with Keynesianism in the US, which is still deluding itself into believing it will be able to squeak through the cracks with no deficit cuts.