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United Economies of Europe

December 5, 2011

It’s still early, and the news agencies are mostly absorbing the data so they can spin this for a victory for centralized government.  This is the best I’ve found so far on real data.

Market sentiment was given an early boost after Italy unveiled a 30-billion-euro package of austerity steps, and the Irish government too said it would do the something similar in a new budget to be announced later in the day.

The positive mood drove Italian bond yields further below the worrying 7 percent level at which they are seen as unsustainable and the cost of insuring Italian debt against default also fell.

Essentialy, Germany has backed the European Central Bank in a trillion Euro deal that is TARP for Europe.  Treasury Secretary Tim Geithner is also present Europe this week, and it appears that the US will do some judicious currency conversions to help.  Most interesting I’ve heard so far this AM is that this won’t be done by floating bonds… this is Europe centralizing the bail-out and pushing all the countries to vet their recovery plans.  Direct quote (the TV says) from the Italian Welfare Minister to the unemployed and retired in Italy: “The people who work have no more money to give you.”

Well, duh.

All of this is still lukewarm air until detials come out.  We’ve yet to see what riots will spark as retirement increases and pension funds get raided to keep the lights on in various countries.  The US markets are up nicely on the news, and many of the business experts this morning have been saying that the relaxing of Europe tensions might finally get people to realize that the market is under value right now.  Um, okay.

It seems to me that everyone is looking for a little Christmas (oh, sorry, HOLIDAY) cheer to close out what’s been a pretty shaky year of markets.  And news is so far pretty good… gas is going down even as oil goes up.  Even though Iran and Pakistan are at a boing point… hey we’re not talking Russia (that’s next year).  From a business standpoint, unemployment will likely stay down for the rest of the month, and we’ll worry about seasonal adjustments in January.

Let’s see how much farther this takes us.  But I will say that people seem to be spending more here, and the streets are still busy.  As long as corporate earnings can hold up, we might even have a good opening to next year.

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