It's all Goldman Sachs' fault says Matt Taibbi

[Jan Klimkowski]

Italy on the brink:

Europe

Scrambles To Deal With Italy Contagion Fallout, Calls Emergency Meeting As Former ECB Official Says "Very Worried About Italy"

Submitted by Tyler Durden on 07/10/2011 10:34 -0400

As was reported last week, Europe has suddenly found itself shocked, shocked, that the bond vigilantes decided to not pass go and go directly to the purgatory of the European core, in the form of the country that, at €1.5 trillion euros, has more debt than even Germany, but far more importantly, has a debt/GDP ratio of over 100%, and has the biggest amount of net notional CDS outstanding (not to mention that it has dominated Sigma X trading for the past several weeks). Italy.

European Rescue Fund Insufficient To Rescue Italy, May Be Doubled To Over $2 Trillion

Submitted by Tyler Durden on 07/10/2011 13:11 -0400

The latest italy contingency stunner comes from Die Welt which has just reported that the European rescue fund will be insufficient to bail out the latest biggest loser in the game of musical ponzi chairs, Italy.

As Reuters translates: "The existing rescue fund in Europe is not sufficient to provide a credible defensive wall for Italy," the central bank source was quoted telling the newspaper in an advance text of an article to appear on Monday. "It was never designed for that," the source added." The newspaper said that the rescue fund might have to be doubled to up to 1.5 trillion euros. But it was not clear if it was the central bank source calling for the increase."

Doubling the bailout fund is not a new idea and was previously proposed by Nout Wellink of the Dutch Central Bank, although as Die Welt explains, the decision will ultimately be not that of the ECB but of the separate governments. Germany, as a reminder, is already the biggest backstopper of Europe, and is on the hook for €211 billion euros as the primary funder of the EFSF: which just happens to be the CDO at the heart of the eurozone.

Should Germany have to add another 200 billion euros to its rescue commitment, Merkel can forget any and all reelection chances, which is funny since just today it was announced that "Chancellor Angela Merkel has stated publicly that she wishes to run again in 2013. This comes as polls show she would face strong challengers from the opposition Social Democrats." Her chances would be roughly zero if German taxpayers learn that the fate of a failed monetary experiment is increasingly more reliant on their direct labor even as the populations of "austere" countries refuse to work and merely subsist on existing entitlements.