The Next Bazooka: How Europe Hopes To Stop Contagion In Its Tracks

Everyone’s hopeful that a big summit in Europe on Thursday will produce some kind contagion-killing result.

Leaders have been downplaying expectations, but it seems clear that the market wants/expects something.

Narrowing yields and rising markets today would certainly seem to indicate some level of optimism.

The latest from Bloomberg (and others have been talking about this as well) is that the European Financial Stability Fund will likely be given new powers to help recapitalize banks and possibly buy debt on secondary markets to bring yields down.

That’s probably short of a real “solution” which would likely involve Eurobonds/a shared fiscal framework, but maybe it will buy everyone a little more time.

The key thing to bear in mind is that in the end, every idea that’s been short of a wholesale solution has flopped.

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