The problem with the EU crisis is that no one really knows much of anything.

“The euro. Everyone has a view, and everyone is profoundly ignorant at the same time. No one knows the answers — there is no template, no relevant past experience.” Pyrford International, a UK fund manager.

I think that’s it. The EU crisis is extraordinarily complicated on a lot of levels. With 17 different countries that can’t seem to agree on much, it is hard to handicap an outcome. But the essence of the problem is that some of these governments — like Greece — borrowed money they cannot re-pay. So either the rest of the EU comes to its aid, or Greece defaults. A default means lots of losses for banks (and others) holding the defaulted debt (with ripples all the way back to the U.S. FED, we just don't know how much or how bad this is going to be for the U.S. because the FED is not disclosing how much has been lent to Europe by the FED).

There are several governments in trouble beyond just Greece. Portugal, Italy, Spain and others are in trouble, too. So do they all get bailouts? Or not? If the EU breaks up, then we’re talking huge losses and the probable disappearance of a number of banks. Just like in 2008 in the US.

Reckoning today from Paris, France...
Yesterday, rumors circulated that the Europeans had their problems in hand. The Dow rose 180 points. The euro went up too, and now trades at $1.37. For all the talk of a disintegrating Europe, the euro has been holding together pretty well.

Gold fell $23 for no apparent reason.

As the day went on, however, the euro solution looked less and less like a solution and more like a disaster. Moody’s took Spanish debt down two notches...and warned that it was looking at France. The New York Times has the story:

Moody’s warned late Monday of a possible downgrade to France’s flawless credit rating. French finance officials worry that any such move would make it hard for Paris to negotiate solutions, according to an official who was not authorized to discuss the situation publicly.

The rally in American stock markets was set off by a report late Tuesday on the Web site of The Guardian, a British newspaper, that France and Germany had agreed to increase the size of the rescue fund — the European Financial Stability Facility — to as much as 2 trillion euros to contain the crisis and backstop Europe’s banks. But almost as soon as those hopes soared, European officials quickly brought them back to earth, with denials flooding forth from Brussels, Paris and Berlin.

This latest round of rumors and rebuttals about a European solution was a repeat of earlier situations... Such episodes have played out several times since the debt crisis intensified this year. Most recently, investors have been pegging hopes on a meeting of Europe’s leaders set for this coming Sunday in Brussels, anticipating that a comprehensive solution to the debt crisis might be unveiled.

Now that the rating agencies are circling France, the whole rescue project is in danger. It is one thing for the big, strong nations — France and Germany — to rescue the little, marginal nations, such as Greece and Ireland. But who’s going to rescue France?

At some point, the Europeans are going to be forced to either default honestly and painfully...or to bail themselves out boldly and fraudulently, like we Americans.

As Americans we are already on the path to financial self-destruction, it's not a question of if...only a matter of time. All Europe is doing is following our horrible example and delaying the inevitable. Our financial implosion will pick up speed, until we finally reach our destination.

Source:
 Bill Bonner
 The Daily Reckoning
 www.dailyreckoning.com