"Take that financial markets!" – the EU & IMF

Very, very early Monday morning in Europe, the EU in conjunction with the IMF announced a massive financial bailout package that is comparable in size to the U.S. TARP funds of the last recession.  Specifically, the components of the EU plan are as follows:

• 440 billion euros of loans from eurozone governments
• 60 billion euros from an EU emergency fund
• 220 billion euro from the IMF

In total this is 720 billion euro (!).  These monies are to be allotted to eurozone economies struggling with the global recession and their own fiscal ridiculousness.

Analysis: The financial markets have had their heart stop over the last several trading sessions and have needed a little bit of electro-shock to restart the heart.  In other words, they needed something dramatic other than the hot air of talk – the EU version of mouth to mouth resuscitation.  I am fairly certain that the size of the bailout package is so gigantic and with specific amounts pledged that the financial markets will be revived.

Very importantly, over the next several weeks the EU will actually need to get these monies passed by individual members.  Fortunately this deal was negotiated with the full participation of EU member finance ministers.  Hopefully that results in easy passage.  Mitigating against that is the fact that quite a few EU states have prime ministers up for re-election and the EU bailout package is not popular with the average Jose or Jeanne EU citizen.

My intuition tells me that this package will succeed in staving off eurozone disaster.

Importance grade: 10; as I have said many times before, financial markets move exceptionally fast.  The speed and magnitude of the eurozone crisis was breathtaking in its fulfillment.  Granted, the cracks in the EU are something I have been tracking for a year and a half and the markets ignored the structural cracks.  But once they paid attention, the response was nearly instantaneous.  The most critical issue to investors right now is the European debt and fiscal crisis.  In my opinion, that crisis of confidence has been averted.  It wouldn’t hurt to cross your fingers and say a few prayers, though!  But where do I stand with my capital?  I have been investing my cash over the past week.  Cash that I had been sitting on since November.  Wanna join in, too?

Jason