Sense of Deception


Category Archive

The following is a list of all entries from the Economy category.

HOT: Curious Trading by Federal Reserve Advisor May Result in JPMorgan Chase $1.264 Billion Windfall

Link

There is some mighty curious trading going on in Maiden Lane LLC, the entity set up by the Federal Reserve to buy some of Bear Stearns’ assets. The Federal Reserve hasn’t released enough information to be able to determine the exact details of the trading, but from the information that is available, it appears that trades are being made for the benefit of JPMorgan Chase.

There are big questions, such as why is a portfolio, that is supposed to be wound down, showing a double digit turnover of its portfolio?

In an EPJ exclusive, Bob English does a forensic analysis of the public information surrounding Maiden Lane and it doesn’t come out smelling roses. The analysis is here.

Advertisements

Intervention Alert – Here Comes The Bailout Bailout: European Cental Banks Gobbling Up Portuguese, Irish And Greek Government Bonds

Link

And so the European private banks win the overnight battle with the Central Banks again: after shorting the EURUSD all the way to almost 1.25, they have forced the European Central Banks to buy ever more of their worthless Government bond holdings. Reuters reports that overnight CBs have been aggressive buyers of Greek, Portuguese and Irish Sovereign (if there is such a laughable concept as sovereign any more) bonds, which in turn has forced a quick short covering spree in the EURUSD and the EURJPY, which in turn has forced futures to go from 10 handles down to up 4. In other words, Central Banks now are fighting tooth and nail to prevent the market from going down ever again. To all the shorts out there- you are no longer taking on merely the Fed, now you have every money printer against you as they scramble to load up with every worthless asset imaginable. At this rate Dow, Dax and Dung Manure 36,000 is easily reachable. The only way to play this is through gold, which is now the only flight from Central Bank lunacy.


People of Greece are talking to Police -english subtitles

— May 08, 2010 — At syntagma square, in front of the parliament


You Are Being Lied To By The Entire Financial System

Link

Posted on May 12, 2010

Almost every US Corporation will do and say anything to keep us spending money, regardless of what they know about the fragility of our entire financial system.  Bankster’s are now using world governments as patsies to commit the largest heist in world history.  Stealing a trillion dollars from US citizens proved to be too difficult, as they had to receive congressional approval to bail themselves out.  Their recent scam involves using the world’s central banks to bypass democracy & funnel money to offshore entities without oversight.   Just think; the IMF, partially funded by the US Treasury; can operate freely & independently as they steal US currency for their cronies without being held accountable to the US taxpayer.

If the American taxpayer ever knew that $1 trillion isn’t going to be nearly enough to save the world from a $700 trillion derivative problem, do you think we’d agree to bailing out the EU with $50 billion?

So-called financial experts and analysts in the U.S. who never warned us about the financial/debt crisis are now putting out propaganda regarding our risk and exposure to the EU bailout.   If you don’t see what’s happening, let me reveal it to you:  Banksters are skirting US regulation & the US Constitution to ship money offshore to foreign central banks.  The US Treasury is the pawn Bankster’s have chosen to filter $50 billion to the IMF —–  like a thief in the night.  Bankster’s will never tell you the truth about our economic outlook because if they did, we’d all default on our mortgage loans and stop spending money altogether.  They’re delaying the inevitable, as they steal in $50-100 billion increments.

The US Government doesn’t want us to know the truth either, nor do they want us to know that they’re funneling taxpayer money to foreign, off-shore banks.  Do you remember the day in 2008 when Secretary Paulson said, “….all we need is $750 billion to save the world from the brink of disaster?….”.  $30+ trillion later, we’re still crafting trillion dollar EU bailouts.

Yesterday I got fed up after I heard the US Treasury pledged $50 billion to the EU on our behalf, so I called them.

The representatives at the US Treasury evaded very direct questions I’ve asked them about why, and on what authority they’ve given $50 billion dollars to foreign Bankster’s on our behalf. (In fact, almost every time I called the US Treasury press office to speak to someone, it seemed as though their office is run by disorganized teenagers who fumble with the phone, mumble incoherent excuses as to why my questions couldn’t be answered, and when I finally reached a responsible person, they sent me a list of talking points that never answered my questions directly.)

Ladies and Gentleman, the entire criminal Banking system has bought-and-paid-for laws that allow them to skirt regulation & oversight, and they’ve built one of the largest powder kegs that’ll destroy the entire global economy; the $700 trillion derivative’s scam.

You see, derivative’s are ticking time bombs that should actually be called “insurance”, but by calling them something else (like derivative’s), Bankster’s are able to get around the regulatory system set up for the insurance industry to minimize risk. Now, we have a $700 trillion ticking time bomb that was built without oversight, regulation, and accountability. (If you don’t know how much $700 trillion dollars is, Google  “GDP of the global economy” — the entire world GDP is estimated at $70 trillion).  As these risky insurance policies (called derivatives) have to be paid out, Bankster’s are losing their shirts, and now they’re extorting trillions more in bailout funds to cover what they knew all along were bad, risky bets.

The US Treasury is merely a high-rollin gambler with the audacity to give foreign Bankster’s $54 billion stolen from our hard working US taxpayers. What’s worse, they have an incurable gambling addiction don’t know when to stop stealing money to offset their losses.

The Treasury is lying to you when they say   “The IMF has ample financing…”  No, Ladies and Gentlemen, there are no countries or banks that have enough money to cover the $700 Trillion dollars in bad bets that were allowed to be placed.   The US Treasury is merely trying to cover their betting losses, and do so by going around the American people.  The New World Order has been set up to bypass & avoid the US Constitution.

We cannot afford $50 billion dollars to cover a Bankster/government gambling problem.  We cannot afford to let any government agency raid the safe and throw money to foreigners without accountability to the American taxpayer.

If it’s legal; just remember who paid the politicians to pass laws that allowed them to get away with it.

Our government has been corrupted by Banksters, and we need to get rid of both entities if they choose to continue stealing from us.

Wake up people. When are we going to Storm the Bastille?   They’ve destroyed the US financial system, now they’ve moved on to implode the entire Global Economy.  Resist the New World Order mainly because its a government being formed by Bankster’s who have seized power, control, and money without democratic elections.   They are sucking every last penny from us & think we can’t do anything about it.

Let’s show them what happens when we all rise up.

PLEASE READ THE FOLLOWING BULLSHIT TALKING POINTS THE US TREASURY ISSUED TO JUSTIFY THIEVERY OF $50 BILLION

Imf Fact Sheet 5.12


Gerald Celente: 2010 Will be the Summer of Terror

Link

May 10, 2010

Alex dissects the recent Dow stock market meltdown with trends forecaster Gerald Celente. Celente is the publisher of the Trends Journal and is a business consultant and author who makes predictions about the global financial markets and other events.


We Need a Bank Of the World

Link

The financial crisis is global, and only an international central bank can deal with it.

By Jeffrey E. Garten | NEWSWEEK
Published Oct 25, 2008
From the magazine issue dated Nov 3, 2008

If George W. Bush’s upcoming global summit on how to fix the world’s broken financial system—an event proposed by several European presidents and prime ministers—is to be a serious effort, the leaders should begin laying the groundwork for establishing a global central bank.

The idea of such an institution would have been a political nonstarter before the current debacle. The crises of the last several decades—the Latin American debt meltdown in the early 1980s, the stock-market crash in 1987, the savings and loan collapse of the early 1990s, the Asian financial blowup of the late

1990s, the Internet-stock collapse earlier in this decade—did not involve the extent of global linkages among financial institutions or the mind-boggling consequences of complex securities that we are seeing today. In none of these previous blowups did the global credit system shut down, as it did in recent weeks; in none did governments in both the industrialized and developing world intervene so massively, coming close to nationalizing the entire global banking system.

And in none was it so clear that there is no effective governing authority at the center of global finance. There was a time when the U.S. Federal Reserve played this role, as the prime financial institution of the world’s most powerful economy, overseeing the one global currency. But with the growth of capital markets, the rise of currencies like the euro and the emergence of powerful players such as China, the shift of wealth to Asia and the Persian Gulf and, of course, the deep-seated problems in the American economy itself, the Fed no longer has the capability to lead singlehandedly.

After World War II, the IMF was designed to be a central financial institution, too. But over the decades it has had less and less influence on the rich industrialized nations. Its credibility with Asia and Latin America has also waned. It is still involved in bailouts for countries such as Iceland and Pakistan, but its once central role in protecting global stability is clearly over. And most important, its political legitimacy is deeply flawed, because its management structure reflects the 1950s, with Belgium having more voting power than China.

In the future, a global central bank is needed to oversee the rudderless global financial system. There are a number of critical functions it could perform.

Read Entire Article


Toledo Man Streams Foreclosure Occupation Over Internet

Kurt Nimmo
Infowars.com
May 4, 2010

Keith Sadler is a victim of the Greatest Bankster Heist in History. He lost his UAW job thanks to the premeditated de-industrialization of America and now the bank wants to take his home through foreclosure. On Monday, he was to be evicted from his home in Toledo, Ohio, but he has vowed to resist.

Read Entire Article


Bailed out Buffett: Buffett firms got $95 billion of bailout cash

Link

By John Byrne

Published: August 5, 2009
Updated 1 year ago

The richest man in the world doesn’t need $95 billion dollars.

But apparently, the companies he invests in did. According to a new report, companies in which Warren Buffett owns sizable minority stakes received a whopping $95 billion in Troubled Asset Relief funding, as Buffett was shilling for investments in common stocks.

To be fair, his holding company, Berkshire Hathaway, has received no government aid. In fact, Berkshire became a major lender in the wake of frozen US credit markets, injecting $5 billion into General Electric, Goldman Sachs and even motorcycle-maker Harley Davidson at hefty interest rates.

A bitter Reuters blogger, however, points out that Buffett’s investment holdings have benefited greatly from taxpayer’s largess. Aside from the nearly $100 billion in taxpayer aid extended to Buffett’s holdings — which include mortgage lender Wells Fargo and Bank of America, credit card leviathan American Express and the bonus-happy brokerage Goldman Sachs — his companies also benefit from $130 billion in FDIC backing for their debt.

“Were it not for government bailouts, for which Buffett lobbied hard,” writes Reuters’ Rolfe Winke, “many of his company’s stock holdings would have been wiped out.”

Buffett owns 27 percent of Berkshire Hathaway, for which he serves as chairman and chief executive for an annual salary of $100,000. He’s known for his frank and simple-worded investment advice, often laced with colorful sexual metaphors.

Winke says Goldman Sachs would have collapsed without government aid it received. The bank recently paid back its TARP funding — seen as an effort both to signal to the markets its financial strength as well as to get out from beneath a bevy of restrictions on company practices, including massive bonus payments to executives.

Without government backing, Winke notes, “banks that couldn’t finance their balance sheets would have sold toxic assets at market prices, and the losses would have wiped out their shareholder’s equity. With $7 billion at stake, Buffett is one of the biggest of these shareholders.”

“He even traded the bailout, seeking morally hazardous profits in preferred stock and warrants of Goldman and GE because he had “confidence in Congress to do the right thing” — to rescue shareholders in too-big-to-fail financials from the losses that were rightfully theirs to absorb,” the writer adds.

Winke notes that Buffett even complained about the favorable treatment given to his own investment holdings.

“Funders that have access to any sort of government guarantee — banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella — have money costs that are minimal,” Buffett wrote in his annual shareholder letter.

“Conversely,” he added, “highly-rated companies, such as Berkshire, are experiencing borrowing costs that … are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.”

Remarks Winke, “It takes remarkable chutzpah to lobby for bailouts, make trades seeking to profit from them, and then complain that those doing so put you at a disadvantage.”

Buffett, though, is a strange egg in financial circles: he recently admitted paying just 19 percent in federal income tax, saying it was inappropriately low, and is a major proponent of the estate tax. He’s also the bete noire of some corporate executives, having been a major critic of executive salaries and stock options in years past.


The party’s over for Iceland, the island that tried to buy the world

Link

Almost overnight, its population became the wealthiest on Earth. Tracy McVeigh in Reykjavik finds that the credit crunch is making the cash disappear

Blue LagoonLie back and think of an economic upturn…bathers take to the Blue Lagoon, near Reykjavik. Photograph: Bruno Morandi/Getty

The snow has arrived early in Reykjavik after an unusually long and warm summer. The freeze has brought out the ghostly green haze of the aurora borealis – the Northern Lights – the shape of which shifts dramatically across the tiny city’s black skies.

The bars and restaurants of Iceland’s capital are packed, the Range Rovers and BMWs are parked nose to tail all along the streets of the central 101 district, and music is pumping from a black stretch Hummer limousine cruising by.

‘What can we do? Its difficult times but we’ve spent all day talking about it, watching the news getting worse and worse. We had to go out and be with friends. Maybe it’s like the party at the end of the world,’ says Egill Tomasson, 32, sitting in the Kaffeebarinn bar.

Iceland is on the brink of collapse. Inflation and interest rates are raging upwards. The krona, Iceland’s currency, is in freefall and is rated just above those of Zimbabwe and Turkmenistan. One of the country’s three independent banks has been nationalised, another is asking customers for money, and the discredited government and officials from the central bank have been huddled behind closed doors for three days with still no sign of a plan. International banks won’t send any more money and supplies of foreign currency are running out.

People talk about whether a new emergency unity government is needed and if the EU would fast-track the country to membership. On Friday the queues at the banks were huge, as people moved savings into the most secure accounts. Yesterday people were buying up supplies of olive oil and pasta after a supermarket spokesman announced on Friday night that they had no means of paying the foreign currency advances needed to import more foodstuffs.

This North Atlantic volcanic island, which is the size of Cuba, with a population of 320,000 – the size of Coventry’s – is an unlikely player on the global financial stage. It is famous for its fish, geysers and for winning the UN’s 2007 ‘best country to live in’ poll. But Iceland built its extraordinary wealth on the crest of the worldwide credit boom and now the crunch is sweeping it away, bankrupting a people for whom the past eight years have been, for most of them and by their own admission, one long party.

The nation’s celebrated rags-to-riches story began in the Nineties when free market reforms, fish quota cash and a stock market based on stable pension funds allowed Icelandic entrepreneurs to go out and sweep up international credit. Britain and Denmark were favourite shopping haunts, and in 2004 alone Icelanders spent £894m on shares in British companies. In just five years, the average Icelandic family saw its wealth increase by 45 per cent.

But, as a result of the international banking crisis, the billionaires who own everything from West Ham United football club to the Somerfield supermarket chain, Hamleys toy shops and the House of Fraser, are in trouble and the country is drowning in debt.

Iceland’s cheap labour force, the Poles and Lithuanians, have left already – there’s little point in sending home such a worthless currency, and the tourist season is over. Iceland is on its own.

In the Kaffeebarinn, Egill Tomasson isn’t drinking because he has a music festival to organise. Iceland Airwaves takes place in a fortnight, when more than 100 Icelandic bands and 50 foreign ones will play in venues around the city over four days. Most of the tickets have been sold in krona, but the international acts need to be paid in euros, which is going to cost the organisers dearly.

‘People here are going to need this festival,’ says Tomasson. ‘This crisis has been a heavy blow. And many people should have a bad conscience for what has happened. Someone should be prosecuted, they have sucked Iceland dry, taken the money and ran, and left us totally in the shit. People I know who have gone to the UK or the US to study have found their grants worthless, they are stranded.’

Like many his age, Tomasson has only a vague memory of harder times, before the boom that brought Iceland the highest per capita wealth in the world. Older islanders call them the ‘Krutt-kynslotin’ – the cuddly generation. Eco-aware, earnest but pampered, they drift from organic café to bar, listening to the music of Björk and Sigur Rós, islanders who have made it big abroad. ‘They will have to get their hands dirty now,’ says chef Siggi Hall, Iceland’s answer to Gordon Ramsay, with an effusive vocabulary to match.

‘That’s good though, they are the I-generation; iPods, iPhones, everything starts with I. Well, we will have to go back to the basics now. Icelanders are risk-takers, but hard working, they will have to downsize. We will have to eat haddock and Icelandic lamb and forget these imports of goose livers and Japanese soy sauce. When everyone was extremely rich in Iceland – you know, last month, it was with money that they never have earned. Now those who were extremely rich are just normally rich, but they think they are poor. They were spoilt, spending billions.’

Hall is due to open his new restaurant on 17 October, but insists the crisis is not worrying him. ‘I had been losing customers because people were flying off to Copenhagen and London and New York for the weekend, to eat out. Now they will stay in Iceland, but they will still eat out. People need to eat.’

Outside the city’s Hofdahollin car showroom, looking a little rumpled for men trying to sell new and used cars for £35,000 and up, owner Runar Olafsson and his top salesman are sharing a Marlboro. They are not expecting any customers today. ‘A few years ago we couldn’t get enough top-end cars and we started importing them. We were selling 120, 140, a month. But it turned around so fast,’ says Olafsson. ‘It’s so dramatic, just in one month. We have already seen two dealers go down.

‘Customers would come in and we would apply for credit online for them, a 100 per cent loan, and they can drive away in their new Range Rover. It took ten minutes, it was very easy. But 60 to 70 per cent of those loans were in foreign currency, Japanese yen or Swiss francs, and they have gone up 90 per cent as the krona burns. A car worth 5 million krona now has a 9 million loan on it; how are people going to make those payments?’

Foreign currency loans are a problem for homeowners, too. ‘Loans have been very cheap, house prices rose and there was a lot of good-quality housebuilding. But the building has halted, nothing is being finished, nothing is selling. The interest rates are staggering. What people are doing now is swapping houses if they want to go bigger or smaller. That is what is keeping us afloat,’ says estate agent Ingolfur Gissurarson. His mobile goes off – the ringtone is A Hard Day’s Night by the Beatles. ‘I changed it to suit the times,’ he smiles.

Blame it on the Vikings. Icelanders like to hark back to their ancestors, the rebel Vikings who, as the nation’s most revered daughter Björk once explained, ‘couldn’t deal with authority in Norway. So they flew off in this mad ocean in a wooden boat which is pretty hardcore, North Atlantic in the year 800. And they found this island full of snow … yeeeah!’

‘The Icelandic psyche is an important part of all of this,’ says Hellgrimur Helgason, who writes an outspoken newspaper column which exposes feuds between Iceland’s ruling class and its entrepreneurs. He is also the author of 101 Reykjavik, a popular novel populated by ‘Krutt-kynslotin’ characters.

‘Before the market reforms the country had stagnated, no one thought Icelanders could be businessmen. We were poor fishermen or farmers, so it had an incredible effect on confidence when we saw these young men out buying up British and Danish companies. Everyone grabbed at the new opportunities like children. Really, it was no surprise that Hamleys toy shop was one of the first purchases.’

Gunnghilder Sveinbjarna and her friend, Anna Lara Magnusdottir, are ordering their second bottle of red wine in the Philippe Starck-designed interior of Reykjavik’s Bar 5. Tonight the young women are feeling no pain.

‘We come out at the weekend to forget our children and our problems, and this time we will drink extra hard to make sure we forget the economic crisis too,’ says Gunnghilder, raising a glass. ‘Tomorrow the sore head.’

The door to Hell

• Iceland is known as the Land of the Midnight Sun because in summer there are almost 24 hours of daylight.

• There are 15 active volcanoes in Iceland, including Mount Hekla, long believed to be the entrance to Hell.

• More books are published per capita in Iceland than in any other country.

• Many Icelanders still practise the old Viking religion of Norse mythology.

• Icelanders drink more Coca-Cola than anyone else in the world.

The British connection

• Iceland’s biggest bank, Kaupthing, has investments in Costcutter, Somerfield, Jane Norman and the Laurel Pub Company which manages the Slug & Lettuce chain. It jointly owns Kaupthing Edge, an internet savings bank with 150,000 British savers.

• Baugur, an Icelandic international investment company, has significant stakes in Iceland supermarkets, Moss Bros, French Connection, Woolworths, Saks, Whittard of Chelsea, Goldsmiths, House of Fraser, Whistles and Oasis.


Many possible triggers for wider euro debt crisis

Link

(Reuters) – Europe may be months, conceivably weeks away from an expanded debt crisis that cuts more countries off from access to the markets and forces fresh emergency action by rich governments or the European Central Bank.

Deals

The many potential triggers for an expanded crisis include a failed bond auction, any signs that Athens or donor nations were backing away from a 110 billion euro ($141 billion) bailout of Greece, and a freezing up of Europe’s interbank money market.

For now, Portugal, Ireland and Spain, widely seen as the next possible “dominos” after Greece, remain in significantly better shape. The interbank market is far from grinding to a halt as it did after Lehman Brothers collapsed in late 2008.

But the spread of investor jitters in the past 24 hours, affecting markets as distant as yen swaps in Tokyo, suggests market conditions could deteriorate as rapidly as they did during the global financial crisis of 2007-2009.

“In my view there is a 10-20 percent chance that at least one more country will need rescuing as it finds itself shut out of the markets,” said Marco Annunziata, chief economist at Italy’s UniCredit bank.

“If it happens, it is most likely to happen in the coming six months.”

Lena Komileva, head of G7 market economics at money broker Tullett Prebon, said the crisis over Greece’s solvency had morphed into a capital markets crisis, and the markets had begun to feed on their own momentum.

“Another credit event similar to Greece can happen within weeks,” she said.

German Chancellor Angela Merkel and top economic policy makers in the euro zone appeared to recognize this in their warnings about the risk of an expanded crisis on Wednesday.

“It’s absolutely essential to contain the bushfire in Greece so that it will not become a forest fire and a threat to financial stability for the European Union and its economy as a whole,” said European Monetary Affairs Commissioner Olli Rehn.

TRIGGERS

Greece became unable to finance its debt at affordable rates when its 10-year government bond yield soared near 10 percent in April. The euro zone’s other weak countries have not reached that stage; Portugal’s yield was below 6 percent on Wednesday.

Portugal sold 500 million euros in six-month Treasury bills on Wednesday at a yield of 2.955 percent, which was about four times the rate at the last such sale on March 3 but was well below maximum levels in the secondary market. This was seen as a moderately positive sign by analysts.

Spain is expected to succeed in selling 2-3 billion euros of government bonds on Thursday, although at a much higher yield than in its last auction, analysts said.

Nevertheless, every debt sale by weak euro zone states in coming months is likely to be viewed as a potential flashpoint for an expanded crisis. Portugal plans to offer more T-bills on May 19 and Spain plans another bond sale on May 20.

Annunziata estimated Spain’s bond spreads were still low enough for it to borrow at current rates for at least a year or more without doing serious damage to its finances. Portugal can keep borrowing at current rates for at least a year, he said.

But he added, “The problem, as for exchange rates, is also the speed of the movement. If spreads keep widening then markets could more quickly lose confidence and the problem would be the quantity of available financing, not the cost.”

Meanwhile, the Greek bailout package announced this week imposes such harsh austerity measures on Greece that the markets will continue doubting the country’s political will and economic ability to stick to the package.

Any sign that the government of Prime Minister George Papandreou was backing off from key fiscal reforms in the face of public opposition could raise the prospect of a Greek debt restructuring or default, triggering an expanded crisis.

The European Commission and the International Monetary Fund will monitor Greece’s progress every quarter and link aid disbursements to those reviews. The reviews could become triggers for an expanded crisis if Germany, where public opinion strongly opposes helping Greece, decides Athens is not meeting aid conditions and balks at a disbursement.

The markets could also panic if commercial banks around Europe, which have cut off funding lines to Greek banks, decide to do the same to banks in Portugal, Ireland and Spain.

So far the stresses in the money markets do not approach those seen at the peak of the global crisis. The two-year euro zone swap spread, which measures the aversion of lenders to deal with any but the most creditworthy borrowers, has widened to 65 basis points, its widest since mid-March 2009, but is far below the record 130 bps hit in October 2008.

However, large Spanish and Portuguese banks are having to pay a higher price to access the interbank market, and this premium could widen if sovereign debt markets sink further.

EMERGENCY STEPS

The political difficulty of assembling an international bailout for a country — the Greek bailout was preceded by months of wrangling between angry governments — suggest the ECB would be the first institution to respond to an expanded crisis.

It could reintroduce emergency measures taken during the global crisis, resuming a programme of lending in dollars and Swiss francs over six- and 12-month maturities, or extending its promise to lend banks all the weekly funds they need at fixed rates beyond mid-October.

It might also abandon minimum credit rating requirements for more countries’ sovereign bonds when they are used as collateral in its money market operations, as it did for Greece this week.

Its most radical step would be to buy countries’ bonds from the secondary market, shouldering their debt — though that would be hugely controversial and hurt the ECB’s reputation for conservative monetary policy. Analysts think it might pledge some 200 billion euros in such purchases.

“They’ve a huge amount of armoury at their disposal. They can do a huge amount of things and I think they will be able to stabilize the market at some point,” said UBS chief European economist Stephane Deo.

An expanded crisis could also prompt a fresh bailout effort by rich euro zone governments desperate to preserve confidence in their currency and protect their banks from defaults. Analysts estimate a bailout of Portugal, Ireland and Spain might cost around 400 billion euros.

But the political difficulties of agreeing on an expanded bailout could dwarf the challenge which Greece posed. The European Commission is to propose a permanent mechanism for handling such crises on May 12, possibly drawing on a German proposal for a European Monetary Fund. But actually creating the mechanism might require contentious changes to the European Union Treaty that would require many months.

Regardless of how Europe resolved an expanded debt crisis, the reputation of its key economic institutions, which failed to act quickly and decisively to address Greece’s troubles, would likely suffer lasting damage among investors.

Stephen Jen, managing director of macroeconomics and currencies at BlueGold Capital, said Portugal would probably also need emergency aid from the EU and the IMF.

“This short-term fix could have serious negative… consequences for Europe, the IMF, the ECB and the euro,” he said, predicting both Greece and Portugal would likely reschedule their debts eventually.

“I maintain my view that there will be no happy ending for Greece.”