07:52 – And now we have former UK PM Gordon Brown warning that the euro crisis may lead to Italy and France requiring bailouts. There’s not a whole lot of “may” about it. Italy and eventually France will require bailouts; only the timing is in question.
Much depends on the outcome of the Greek election tomorrow. If New Democracy and PASOK win enough votes to form a coalition government, that may delay the collapse for a few more weeks or even months. If the anti-austerity parties, led by Syriza, gain enough votes to form a coalition (which is unlikely, even if Syriza is the top vote-getter), things will go downhill faster. Regardless of the outcome, Monday morning is likely to be exciting on the markets.
If the anti-austerity parties win, that will be perceived by the markets and by the EU as a vote in favor of Greece abrogating the bailout terms and leaving the eurozone. If that happens, the markets will turn their focus to Italy, which could be forced to seek a bailout as early as next week. Of course, there’s no money available for such a bailout, which will simply increase the pressure on the ECB to inflate its way out of the problem, a fix that’s worse than the underlying disease. The EUrocrats have painted themselves into a corner from which there is no escape.
Everyone, including Obama and other world leaders, is demanding that Germany Do Something. Merkel, the only one in this group of “leaders” who has any clue, correctly points out that there’s nothing Germany can do, and that even if Germany did what is being demanded of it, it would have no beneficial effect and merely doom Germany along with the rest. At this point, there’s no doubt that Merkel is perfectly aware that the euro is going down. Her only concern is, as it should be, to minimize the effects of that collapse on Germany and German taxpayers.