If your family’s balance sheet was carrying too much debt, do you think a logical solution would be to take on more debt? Sounds kind of silly, but that is part of the core strategy in Europe. By promising more aid and more taxpayer funds, leaders continue to kick the debt can down the road. In the intermediate-term, the financial markets love bailouts and printed money, which is what’s driving gains in the S&P 500 futures as of 5:30 a.m. EDT. From Bloomberg:
European governments moved to bolster their rescue funds, seeking to shield Spain and Italy from the fallout of the debt crisis without alienating bailout-weary voters in wealthy countries.
Finance ministers neared an agreement to run the temporary and permanent funds in parallel until mid-2013, potentially raising the upper limit on emergency lending to 940 billion euros ($1.3 trillion). Amounts immediately available would range between 340 billion euros and 640 billion euros.
Today’s step will lift the maximum aid sum from 500 billion euros. It involves running the 500 billion-euro permanent European Stability Mechanism alongside the 200 billion euros committed by the temporary fund to Greece, Ireland and Portugal, according to a draft statement prepared for the meeting.
The ECB’s bank lending and bond-buying brings the total to 2 trillion euros, according to one official’s calculations.
Much of the credit for the lessening of market tensions goes to the more than 1 trillion euros pumped into the financial system by the ECB since December. Ten-year bond yields in Spain, for example, have fallen to 5.44 percent from 6.70 percent on Nov. 25.
If stocks can rally for a few days, the strength and conviction, or lack thereof, will be very important. A weak push toward 1,420-1,440 would be concerning. A move backed by better breadth, volume, and some participation from energy stocks/commodities would give the bull a little more juice.