At the centre of this storm is the European Central Bank which has to make key decisions about how it deals with its Euro member states and whether it is willing to bail them out.
Europe has not been faced with such a crisis since Black Wednesday, when the exchange rate mechanism which held together the continent’s currencies was challenged by a cash rich Geoge Soros and his hedge fund.
His moves put Britain moments away from meltdown as he short sold the pound to the point where the UK had to exit the agreement or face massive devaluation.
Now with weak links along its southern underbelly, Europe is doing what it can to preserve countries like Greece and Spain amid sovereign debt crises within those states.
But the result has only been more uncertainty, as CDS spreads have widened in those states and the word bailout is being said without caution throughout the European banking community.
The downward pressure on the Euro this week, coupled with the growing CDS in PIIG countries, is leading towards a scenario where the Euro might face even further devaluation if it doesn’t bail out its troubled neighbours.
It’s almost as if the ECB’s leaders’ hands are tied, without a choice, and now they just have to figure out how to bring in their debt ridden stragglers.
Because certainly they can’t let them go, as it would undermine the Euro and, more broadly, the European Union project it is so heavily tied to. Right?
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