Be afraid, very afraid.
Zero Hedge on those German leaks to force greater Spanish austerity, and the Spanish retailation to force the publication of Euro banks stress testing.
One of the more ominous news of the day came from Reuters, which reported that the previously disclosed rumor that Spain was seeking a €250 billion bail out package, had in fact originated from high-placed German officials. The move, which will could easily set off an intraeuropean cold war, was prompted by the increasing schism between Europe’s (so far) solvent core and the insolvent Club Med, and was intended “for Spain to take tougher austerity measures to cut its huge budget deficit.” Instead, the tsunami of denial that resulted, only exacerbated matters and made it seems like Spain is truly on the brink. Compounding this animosity, was the disclosure that Spain’s direct counterattack took the form of the El Pais story that “quoted Spanish government officials as saying Madrid wanted to publish the results of stress tests being conducted on its banks to reassure markets” a move which has been opposed by Germany and especially by Austria, which believes that publishing the true deplorable state of affairs of its Erste and Raiffeisen Bank would cause yet another bank run. At the end of the day, none of this helped either unlock Spain’s frozen interbank or money markets, or encourage a sense of credibility in the euro (turns out that was only courtesy of the biggest short squeeze in Euro history). In fact, if such political low blows are to be expected, it is only a matter of time before all investors completely desert Europe and let it deal with its escalating vendettas on its own.