Dichotomy in Europe

The premium Greece, Spain and Portugal pay over Germany on 10-year bonds is greater than it was when Europe announced their so-called 750 billion euro package.  The true value was half as that when taking out the 250 billion euro that was said to come from the IMF but there was no commitment to give any funds to a region in general, and EU’s 60 billion euro contribution (as EU members not in the euro zone balked).  Lastly, given that the vast majority of members do not have triple A ratings, the only way the EFSF could issue tripe-A paper is if the amount guaranteed was about 20% more than the amount of bonds issued.  With this in mind, it seems that Germany most be carrying the load for Europe.

The European Central Bank raised its central forecast for 2010 economic growth in the euro zone to 1.6% from 1%, President Jean-Claude Trichet said Thursday.  Mr. Trichet said the ECB’s staff now expects gross domestic product for the 16-country area to grow by between 1.4% and 1.8% this year. When the ECB had last updated its forecasts three months ago, it had forecast a range of 0.7% to 1.3%.  For 2011, the ECB raised its range of forecasts to between 0.5% and 2.3%, from an earlier estimate of 0.2% to 2.2%. That implies a midpoint of 1.4%, up from 1.2% three months ago.