The Big Three

Forget Greece for a second. Forget Italy. Forget the individual countries, and let's look at Europe more systemically. There are three issues that seem to be good flag posts for the ongoing crisis, and there can't seem to be a solution that solves all three. Addressing two of the three issues seems to starve the third of much needed attention.

Those three things are:

1) Bank solvency

2) Sovereign stress

3) Bank funding

It's interesting how when addressing bank funding and bank solvency (naked CDS/stock shorting ban), the sovereign risk seems to have blown out.

Over the next three years, ~$1.7 trillion worth of debt needs to be rolled out (either paid or kicked down the road with the issuance of new debt). An EFSF levered 4x-5x will not be able to cover such an amount, not to mention the bank recaps and continual buying of securities. A number closer to $2 trillion would be needed... but seeing as how bond auctions can barely get covered in Europe as it is now, all with extremely high yields, it does not seem like this problem is shrinking nor solved.