Herman Von Rumpuy Chimes In

The two agreements reached were:


1) They have agreed to a date in which to kick the can down the road


2) As far as bank recaps go,


"Short term recapitalisation is needed in the current exceptional circumstances to create a temporary buffer allowing the banking system to withstand shocks in a reliable manner. Agreement has been reached that banks should be required, by 30 June 2012, to have 9 % of the highest quality capital. This figure should take into account a marking down for sovereign bond holdings against current market prices (as of 30 September 2011). Banks should raise capital in the first place from private sources, and only if that is not possible, seek support from national governments. If the latter support is not available without creating systemic risks for the Eurozone, the EFSF should provide the loans for recapitalisation.

Any form of public support, whether at a national or EU-level, will have to comply to the rules of the state aid crisis framework. The Commission has indicated it will be applied with the necessary proportionality in view of the systemic character of the crisis. With these measures, we restore confidence and put Europe's banking sector on a sound footing."

This is so full of holes it's hard to know where to start. I guess you can start by what is missing-THE COMPREHENSIVE EU SOLUTION TO THE CRISIS INCLUDING ITALY AND GREECE AS WELL AS LEVERAGING THE EFSF-NO MENTION OF IT.

At least he acknowledges the "shocks" that are coming to the banking sector.

The 9% capital is nothing new, this was reported weeks ago, so no meeting was needed for this.

" This figure should take into account a marking down for sovereign bond holdings against current market prices (as of 30 September 2011)."

Here's a real problem, banks need to raise something like double their current market capitalization, to make it even harder, all of the bonds of PIIGS that have thus far been marked to par will have to be marked to market immediately causing huge losses that will also have to be overcome in their effort to recapitalize.

"Banks should raise capital from private sector sources"-THEY ARE LOCKED OUT!

If that is not possible, then they must turn to their national governments, but they  will have to comply to the rules of the state aid crisis framework.  Which is different for each government, Greece and the rest of the PIIGS are in no place to recap banks.

Only if they can't raise capital through steps 1 and 2, "the EFSF should provide the loans for recapitalisation."

Note the word "Should", not "we have agreed on this course of action" and how could they when they have not agreed to leverage the EFSF which as a Finance minister stated could be "Swallowed in one gulp by Greece alone". Furthermore, they still have no idea what the banks will need, but it sounds like close to a trillion dollars of which at this point the EFSF only has $440 billion dollars.

BOTTOM LINE-A HUGE DUD