Broken record time. I’ll give you one guess as to what sort of news has come out of Europe in the past 24 hours.

Actually that’s not as easy as it seems, because it could be merely “bad” or it could be “disastrous”. Your call on what follows.

Less than a week after the Brussels summit notionally produced some more firepower for the bailout funds needed to stabilise states in extremis such as Greece and Italy, the money may not be forthcoming. The European leaders’ communique said they expected further contributions to the IMF from non-European countries in addition to the €200 billion agreed last Friday. But Japan signalled yesterday that it would be reluctant to contribute. “The EU must make further efforts to convince markets,” the Japanese finance minister said.

The previous summit agreement in late October saw top European bureaucrats dispatched to China to ask for IMF contributions. They came away empty-handed. The Cannes G20 summit was unable to agree on specific additional IMF contributions by non-European countries. Two of the BRICS, Russia and Brazil, have committed to around €10 billion each in response to the Brussels outcome.

But Germany’s Bundesbank has indicated it won’t provide any funding unless countries outside Europe do so, establishing a vicious circle of non-commitment.

Non-Euro EU countries such as Britain are on the hook for €50 billion of the €200 billion, with the Brits likely to have to stump up with bulk of funding. But David Cameron has indicated his government won’t be going beyond the €40 billion he agreed before the G20, most of which is already committed.

Europe already had a problem with a lack of firepower in its efforts to combat the financial crisis. Last Friday’s agreement was a non-solution anyway but the lack of confidence it is generating threatens to undermine whatever remaining support exists within markets. Yesterday, Italy sold €3 billion of five-year bonds at 6.47%, the highest any government has paid during the euro era. Compare and contrast with the 2.925% the US Treasury got yesterday, its lowest ever — and it was three-times oversubscribed. The US is a safe haven despite its trillion dollar debt.

Last night ratings agency Fitch cut five major European banks by a notch because of their exposure to the crisis. One of them, French bank Credit Agricole, has earlier announced 2000 job cuts and a €2.5 billion write-down. Various stock markets were down the usual amounts.

One could go on. The British military are now preparing contingency plans for civil disorder following a euro collapse. The French finance ministry has replaced the traditional petit-fours served at holiday events in favour of plain biscuits, and scrapped Christmas cards in favour of emails — shit, as they say, just got real. Oh, and in news from the real world, Spanish youth unemployment is now 48.9%. Yesterday UK unemployment hit a 17-year high, although it wasn’t as bad as feared by economists.

That’s the only source of comfort at the moment — that things won’t be as bad as feared, in this slowly unfolding catastrophe.

Peter Fray

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