Dutch boy comes up with pizza-based euro solution

Those looking for a bit of humor in the European debacle can find it in statements from Jean-Claude Juncker, head of the eurozone finance ministers. Juncker says "I don’t envisage, not even for one second, Greece leaving the euro area. This is nonsense. This is propaganda. We have to respect Greek democracy." Bear in mind this statement comes from the same man who said "When it becomes serious, you have to lie."

IN A Tuesday post on potential alternatives to austerity in Europe, I wrote:

Earlier today we got one hint that not all is well in the European banking system, as far less than the expected €200 billion was tendered back to the ECB in the second LTRO repayment operation, when just 27 banks paid back some €3.5 billion.

Michael Pettis at China Financial Markets asks the question "Will Greece unravel by Christmas?"Pettis makes a historical case for exactly that while stating "I don’t think Europe can postpone Greece’s exit much longer."　From Pettis, via Email, with Permission ....Will Greece unravel by Christmas?

As far as I can tell, the euro is trading between two extremes. Scenario one is where the sovereign debt crisis hits the euro very hard.  The other scenario is where the sovereign debt crisis does not exist.

The fiscal cliff has taken top billing in the "main risks" sections of investment forecasts and economic outlooks for the past several months as markets awaited the December 31 showdown over spending cuts and tax hikes feared to put a serious drag on the economy. Concurrently, since the ECB's announcement of an OMT bond market intervention plan to combat rising borrowing costs this summer, unsustainably high interest rates have been fixed on a steady downward trajectory in Europe, and the euro crisis has captured less and less attention.

Cyprus is about to prove what anyone with common sense already knew, that Greece will not be the only country requiring haircuts on sovereign bonds. Today the Financial Times posted news of a Radical rescue proposal for Cyprus

Both Greece and Spain are in the midst of huge depressions. The unemployment rate in Spain is 25.8%, in Greece it's 24.4%. Youth unemployment is over 50% in both countries. Greece is in its 6th year of depression and GDP is down another 7.2%. Expect Spain to follow.