FRANCES WALL OF STEEL (aka FRANCE'S WALL OF STEEL - MAGINOT LINE)
Another day, another day of rumour, contradiction, denial, false hope and dithering in Europe.
Today the markets will be digesting two significant related pieces of news.
The FT reports that the European Banking Authority (EBA) will be conducting yet more stress tests on European banks (yes, those same stress tests that were so widely ridiculed before by the markets), in order to assess whether the banks can withstand a significant Greek haircut on their sovereign holdings.
In case anyone is wondering, they can't!
As the FT wrly observes the move is "a tacit admission that the European Banking Authority’s two previous rounds of bank stress tests were not sufficiently robust."
Sadly for the EBA, whatever the findings of "Stress Test III", given the failings of "Stress Test I" and "Stress Test II" the markets will simply not believe the results.
The EBA claim that the new stress tests are not an indication that EU "leaders" are preparing for a Greek default. Instead, they claim that this is a precautionary measure intended to inform rapidly accelerating negotiations on EU-wide bank recapitalisations.
Well I don't think that anyone is dimwitted enough to believe that.
Indeed, as a portent of the likely results, Le Figaro reports that France is preparing a plan to nationalise "2 or 3 banks"..."just in case"; a financial version of the Maginot Line.
We all know what happened to the Maginot Line, don't we?