It is only a matter of time before the EU runs out of money. The EU and the IMF put together a package of 750 billion Euros. It may not be enough. If it is not enough, what then? How many trillions do the Germans and Dutch have?
Here is the scenario. You decide when the EU will throw inn the towel.
Ireland moved toward accepting a bailout under pressure from EU and European Central Bank leaders to stem contagion across Europe’s so-called peripheral markets. The extra yield investors demand to hold 10-year Irish debt over German bunds jumped to a record 652 basis points on Nov. 11. Portuguese and Italian spreads also rose to records this month.
Ireland will tap the 750 billion-euro European Financial Stability Facility set up in May as a financial lifeline for the rest of the euro region after Greece needed an emergency bailout of three-year loans from the EU and IMF.
The cost of a bailout on the Irish scale for Portugal, seen as the next weakest link among the EU’s high-deficit countries, would cost 100 billion euros, based on a package of 60 percent of GDP.
For Spain, whose banks have also come under strain from the collapse of its real-estate bubble, a bailout of 60 percent of GDP would cost 632 billion euros.
For Italy, the region’s second-most indebted nation after Greece, the figure would be 912 billion euros.
I calculate that within one year from today’s date the ball game will be over.
It was interesting, although not exciting. Anyone could see that the Europeans had eaten and drank too much. Now they need a Siesta in the shade.
When they wake up they will be shocked to see that they have to go back to work.