Liquidity is the core issue with the EU crisis. It is like water, a necessary condition for growth in agriculture. The funding cosst are getting tighter. There is a water/liquidity shortage.
The only marginal provider is the ECB and we are unlikely to see then act until it is almost too late. Bid-ask spreads are increasing for all government bonds. Fewer institutions want to make markets or hold inventory for trading. Banks want to get soereign debt off their balance sheets. The Fed has had to provide dollar swap lines to help out EU banks. The lending facilities by the ECB are starting to expand again like earlier in the debt crisis.
The EU needs liquidity in the short-run not restructuring of debt. The restructuring pushes the problem forward but may not solve the liquidity issue.
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