T for trillion that is. The FTSE is up over 5% at close and the French share market was up over 10% during the day’s trading. What a difference a trillion dollars makes. Who’d have thought?
It’s been a wild week or two in Europe, and just like the wild west, the EU has headed debt off at the pass with their $1.1 trillion dollar guns.
No longer called the ‘Greek bailout’ this is the ‘European bailout’ – the US$962 billion, or in AUD$1.1trillion bailout is for all European nations that might be feeling a little shakey in paying back their debts. Rather than go through the whole messy process of default and repo men (which like most repo men activities usually involves losing the China that was given as a wedding present) European nations got together and collectively thought ‘you know we’re all pretty busy, we don’t have time for another round of meetings when Ireland, Portugal and Spain look set to fall over lets just make sure they have money now’.
So like all responsible finance ministers these days, they heaped on the debt to pay off the debt. Nothing quite like paying off one credit card with another is there, they teach that are finance school right?
Financial realities dont’ seem to matter though, markets across Europe are once again full of temporary enthusiasm and confidence – much like a car is full of petrol until you drive it anywhere. As you can see below.
But forget the driving analogy, at some point in the future someone is going to have to pay. There’s now more debt to pay off, as this debt was used to pay off the current debt, which paid off the previous debt.
Right across Europe tonight everyone can take a big breath and thank their lucky stars that financial Armageddon didn’t visit them, no harm done, except that in totally unrelated news Angela Merkel’s party lost crucial votes and seats in regional German elections because of the bailouts.
Nothing quite like politically de-stabilising the strongest economy in Europe is there?