The Sewing Circle includes the ECB

At this point, the rumor/denial cycle in the sewing circle known as the European Union is worse then the bank rumors of 2008 in which the banks said they had no more exposure to toxic mortgages, only to write down a massive amount a month or sometimes weeks and even days later.

So first the ECB will possibly... probably contribute to the Greek debt write down via the EFSF, which as you probably heard in my earlier tone, seemed to be very odd to convert the EFSF to a storehouse of junk bonds from it's original role as a potential gather of funds. Surely transferring Greek bonds to the EFSF would destroy any chance of garnering foreign investment, not that it was likely to happen as they pulled an Austin Powers/Dr. Evil, "We will leverage the EFSF to a trillion, gazillion-billion dollars", yet had to have the ECB send in the clean up crew on a failed $3 billion dollar offering!

In any case, German Bunds are cutting losses as the safe haven move has started as Reuters reports:


 two euro zone sources said European Central Bank policymakers were still divided on whether to contribute to a restructuring of Greek debt.


And thus the Germans going home to vote sometime next week. It is the IMF pressing the matter, Germany has never indicated a willingness to see the ECB participate and Draghi has completely ruled it out, although this was a new and novel idea, I suspect their opinions haven't changed much. At this point, as we all know the EU can't see past their noses as Papademos demonstrated this week when he ordered a report of the impact of a default-something that should have been done months ago, I suspect the Germans will start discussing the possibility of letting Greece go and using any funding to build a firewall around the other PIIGS, which without Greece will be PIIS. The Euro-zone serves one vital function for Germany and this is why Germany would like to keep it intact, it is a FREE TRADE ZONE for their exports. With Greece being broke, Greece doesn't much matter anymore to German exports, with the exception of the military weapons Greece was buying from germany, including a u-boat and a few other odds and ends, interesting that Greece is and was planning on spending bailout money on Frigates, Apache Helicopters, tank ammunition and U-Boats.


Some in the US might call them right wing extremists.


Time to check what credit is doing...