EFSF Plan in Europe is no Free RideSeptember 26, 2011By Russ WinterThe debt ratios of the key players illustrates well first chart that virtually everyone is courting fiscal crisis. The easy way out of turning to bigger, more solvent governments for bailouts has run its course. The chamber is empty. Government debt to GDP is running high everywhere. When a country such as the U.S. runs near 100% gross government debt to GDP combined with huge future deficits, it’s already dead on arrival.Looking at the next dead-on-arrival candidates leads us to Germany and France. Although superficially it appears as if those countries are running a tight fiscal ship, in reality they are highly exposed to enormous losses via the Troika mechanism they have set up to bailout the weak sisters of Europe. These sisters continue to come for more manna from heaven tranches, which in turn further weakens the so-called core countries. How many more tranches can France absorb? France, with a debt to GDP of 88%, was warned back in August on its bogus, inflated, top-notch credit rating. The mere revelation and recognition of the Troika losses taken by France in particular as well as Germany puts these countries into the tar pit. Now this weekend S&P is already out with more warnings that European credit ratings will be lower if a large EFSF plan is announced. Notice when CNBC “released” this story that the Italian 2 year yield increased 26 basis points.
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