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European Debt Crisis

In the eurozone, it’s like ‘Waiting for Godot’

David Brancaccio Dec 6, 2011

I think the theme is Waiting for Godot, waiting for the meeting on Friday in Europe to see if the Europeans can bring out a bazooka big enough to stave off the inevitable default of banks and sovereigns that are carrying way too much debt. – Barry Ritholtz, The Big Picture Blog

It could just be a case of the blahs. Investors didn’t seem eager to place any grand bets today on what European leaders will agree on when they meet later this week. And the stakes continue to be dizzyingly high.

Yesterday, German Chancellor Angela Merkel and French President Nicholas Sarkozy made grand, unified statements — signaling for the first time compromise and a new level of agreement. Markets jumped with relief. But the S&P announcement late yesteday that six of Europe’s strongest economies — including France and Germany — on a credit watch with a 50-5o chance of a downgrade managed to dampen the enthusiasm.

We talked with Barry Ritholtz, CEO of Fushion IQ, author of Bailout Nation and “The Big Picture” blogger at Ritholtz.com. Ritholtz says investors are stuck in a seemingly endless pattern of waiting and waiting for Europe’s leaders to reach some sort of deal. And, like the characters in a Beckett play, the wait may never end.

Ritholtz says when the word “bazooka” gets used about the eurozone crisis, it’s about putting an absolutely mountain of money on standby to bail out government markets. If the Financial Times is right, the bazooka could go higher than $1.2 trillion. That’s a mountain of borrowed money, which might have the power calm markets for a while. But Ritholtz says just as you can’t drink yourself sober, you can’t borrow yourself out of debt.

The challenge for the EU summit now is to finally take concrete action to fix Europe’s underlying economies.

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