Germany Blinks on a Bigger Bailout

Ambrose Evans-Pritchard in the Telegraph reports, "China is unlikely to come to the rescue. Jin Liqun, head of China Investment Corporation, told an Economist forum that Beijing is worried about the "unravelling of the situation" in Europe. "China cannot be expected to buy into high risk in the eurozone without a clear picture of debt workouts. Sorry if I have ruffled feathers," he said.


Stefan Homburg, head of Germany's Institute for Public Finance, said the EMU crisis had already gone beyond the point of no return. "The euro is nearing its ugly end. A collapse of monetary union now appears unavoidable. The Chancellor should have no illusions about this," he said. "

We've posted about the untenable position created for German Chancellor Merkel.  Today, she has deftly taken the postion that she hasn't authorized a bigger ESM facility, but merely accepted the need for keeping the EFSF to run longer so that the ESM can borrow to its full capacity.  No additional German cash has been committed.  Nicely done, but it would seem that investors like Jin Liqun and others will see through this and not like it. 

We have to acknowledge from our previous posting that Stefan Homburg might be a sharp,hedge fund-like investor when he said this, "I myself have invested a considerable sum in Greek bonds. They will mature in one year's time and, if all goes well, produce a 25 percent return on investment. I sleep very soundly at night because I believe in the boundless stupidity of the German government. They will pay up."