In an attempt to plug the leaks before the dam bursts (read Greek election results) Eurozone officials have agreed on a bailout for Spanish banks. However, a few points are relevant: It is not Spain that will determine how much the banks need, but the Eurpoean Commission and other outside experts. Secondly, while the commitment is for EUR 100 bln, (which is an overshoot of what many thought was actually required), some now think the real extent of funding requirement may be even higher than this number. Thirdly, as of now, the package comes with the guarantee of the Spanish Goverment, which probably takes the sovereign debt to unsustainable levels. On top of all this, the money is not going to arrive until later this month, and even then after a positive vote from all 17 members of the Eurozone. Meanwhile, the markets are rejoicing. (Are they really happy with the Spanish rescue, or are they anticipating further injection of liquidity? It doesn’t matter, really!) What matters is we are in an upswing today. The key question is how long will it last. Hmmm. This is not a technical update! Just some thinking aloud while waiting for the next Elliott Wave signal to emerge.
P.S. I recommend that you read Nouriel Roubini’s article written about a month ago.
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