David Einhorn Throws France Under The Bond Vigilante Bus

.... France is now cozying up to its new anti-austerity, pro-money-printing allies, Italy and Spain. This makes sense when one considers that France's economy is more akin to that of its southern neighbors than it is to the German economy. Strangely, the French bond market hasn’t figured this out just yet."

In April, the LTRO “fix” began to wear off as bank customers in Europe’s periphery started contemplating what would happen to their savings if their nation left the Euro. Visions of bank statements not in Euros, but in ‘newly re-issued for the purpose of devaluation’ local currency, offered no twinges of nostalgia. National pride gave way to pragmatism as depositors in Spain, Italy and Greece began transferring money in droves from their respective local banks to less risky banks of other countries – particularly those with German names. The market took note of these incipient bank runs as peripheral sovereign bond spreads raced to new highs.

By early June the market had given back all of its first quarter gains ....a simple analysis of Germany shows that its own fiscal situation isn’t so rosy, particularly if it is also headed toward recession. Were it to try to bail out its neighbors, there is the risk that they would all sink together. Germany already has its own fiscal commitments, and its economy is simply not big enough to bail out the rest of Europe.

The whole thing is such a mess – who can blame them for heading for vacation? ....

By Tyler Durden