The Circular Logic That Dooms Euro TARP From The Start

The Eurozone bailout, now being referred to as Euro TARP, is doomed to fail.  While nothing has been officially announced the markets are rallying broadly on the back of a news article published by CNBC on Monday. The details are lacking as to the actual structure but speculation is already running rampant across the financial markets as to what it might look like.  

What is presumed is that Euro TARP will follow the proposal originally proffered by Tim Geithner on his European trip recently. That proposal had been widely dismissed by the G20 as they couldn't come to terms on any type of structure. The current idea outlined by CNBC will bypass the G20 entirely and allow the European Investment Bank (EIB), a bank owned by the member states of the European Union, to take money from the European Financial Stability Facility (EFSF) and capitalize a special purpose vehicle (SPV) that it will create.  

The SPV will then issue bonds to investors and use the proceeds to purchase sovereign debt of distressed European states, which will hopefully alleviate the pressure on the distressed states (PIIGS) and the European banks that already own their sovereign debt.     

If alarm bells aren't already going off they will be in just moment as you get the gist of the rest of this disastrous plan. 

Read more: http://www.streettalklive.com/daily-x-change/367-why-the-euro-tarp-is-doomed-to-fail.html#ixzz1ZGKPTQw5