Euro: Big Wednesday
My report on Germany's role in the Euro crisis goes out in a few minutes on Newsnight. However there will be no big interview with Germany's finance minister German Wolfgang Schäuble off the back of it. Herr Schäuble blew us out, after much setting up, and did the same to at least one other major news organisation, because of urgent cabinet business.
There is tonight the beginnings of evidence of real contagion from Ireland. I won't grace this with over-emphasis in a TV report but it's worth pointing to (hat-tip to FT Alphaville):
-> Spreads on Spanish and Portugese debt rose
-> A rapid sell-off of the Euro followed Schäuble's remarks in the Bundestag
-> Mohamed El Erian went on Bloomberg to warn that Irish banks were "leaking deposits"
-> Plus a whole number of esoteric secondary indicators are reminding bondmarket insiders (eg on the Alphaville blog) of the pre-May 2010 situation.
We've heard tonight that the Irish government will take a major stake in Bank of Ireland (it already owns 36%); that must mean AIB as well as Anglo-Irish to be nationalised. We've heard from RTE the figure of E85bn as the size of the total bailout.
Market insiders are clear that whatever happens tomorrow (today if it's Wednesday already) has to be big, convincing and effective.
Angela Merkel warned today there was a serious risk of "serial bailouts".
Logically what has to happen is that cross-party agreement is reached on accepting the terms of the Irish bailout (I do not mean I necessarily want it to happen, just this is how it would work for the situation to stabilise). Then we have to see spreads fall back on Portugese and Spanish debt - which closes the doors for the various speculative attacks on sovereign debt we're reading about. And any "bleeding" of retail deposits from Irish banks has to be staunched.
Those are the concrete tasks for Euroland, Irish and IMF officials on the Eurozone's Big Wednesday - otherwise they're gonna need one heck of a big wave board to ride the pipeline of contagion.