Talk about inflation. Have you seen the price of bailouts lately? It wasn't that long ago that €100 billion, or $125B, would buy you a month or two of goodwill. Nowadays, a bank-bolstering plan of this size can hold the attackers at bay for only a matter of hours. As historic and unexpectedly large as this weekend's rescue effort was, it has done nothing to stem the ascent of Spanish bond yields, as well as those of neighboring countries like Portugal and Italy. The euro has given back more than half its initial gains, and benchmark stock indexes across the continent—and in the U.S.—are all off their early highs. To call the reaction underwhelming would not be an overstatement.
To calibrate our own reaction to the news, my co-host Jeff Macke and I go through a four-point emotional check list in the attached video to see exactly where we stand and if our expectations have been affected in any meaningful way. As we see it, the Spanish deal had to be done in much the same way that fire departments respond to calls as they come in. To extend that analogy, it's safe to say we have not seen the last 911 call from the Eurozone.
"It's a sector-specific bailout in Spain," Macke says. He then asks, "So what's next?"
The bond markets of neighboring nations would be the first place I would expect to see signs of erosion, as well as a heightened debate about the ramifications surrounding this Sunday's election in Greece (which pits voters directly against their counterparts in the Deutschland). What isn't yet clear is which of these two players has more at stake (and more to lose) by staying together or walking away.
At the same time, it's worth pointing out that countries like France seem to have suddenly disappeared. Only three weeks ago they were leading the charge—and media coverage—with their new plans to push back on austerity.
"There's no road map; it's chaos theory," Macke concludes of the present situation. That hoped-for vacation from Europe is going to have to wait.