Surprised local taxpayers from Stockton, Calif., to Scranton, Pa., are finding themselves obligated for parking garages, hockey arenas and other enterprises that can no longer pay their debts.

Officials have signed them up unknowingly to backstop the bonds of independent authorities, the special bodies of government that run projects like toll roads and power plants. — (NYT)

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Bailouts at the municipal level, how about that?

Wow.  

PragCap, Martin at Macronomics, and I are on the same page.  I noted that while equity markets are rising on reports of the Eurozone bailout, there are palpable red-flags.

The act of leveraging the EFSF is in effect infecting the core-countries of Europe.  Sovereign spreads are still rising and the bond market isn’t buying this plan of countries in fiscal trouble pledging to bail themselves out.  I also mentioned this problem in one of the more recent Weekly Bull/Bear Recaps.

(Weekly Bull/Bear Recap — Oct 10-14, 2011) 

Another issue that hasn’t been mentioned is the growing unrest and nationalism, which I believe will only get worse as austerity is further imposed.  The idea of sovereign countries subjecting themselves to the rule of a supranational organization (headed by Germany no less) that can levy penalties on them is a lot to ask for when one considers their histories and cultures.  They are NOT states, they are sovereign countries with thousands of years of history.    

I hear about how everyone needs the Euro and that breaking it up would be disastrous.  Yes it would be very painful, but if the other road leads to continued depression-like conditions for the periphery countries, there may come a point where they just don’t care anymore.  

Peter Tchir nails it here…I was thinking along the same lines this morning.  

The hubris that the investment community displays with the notion that someone would pick up the tab should Slovenia vote “No” completely misses the bigger picture.  Continued passage of the EFSF without Slovenia would make the package illegitimate.

Another point is the fact that it’s been this difficult to get the expansion past in the first place.  There’s a clear indication that countries are questioning whether to keep throwing money at a black hole that is getting bigger.  

— And 2 final points from me. —  

1. Most have seemed to forget that France is on very shaky ground with regards to its AAA credit rating.  With talks of harsher cuts for Greek bondholders it’s getting dicey for the French banks.  French government officials may need to step in to shore up their banking system.  If their rating gets cut, the bailout package would need to be readjusted.  Think Germany, Finland, etc. have more political will to pony up more cash?Quite the circular roller-coaster.    

2. The blatant display of unjustness with the whole situation (with what we’re are witnessing happening) is downright disgusting.    

You have rolling blackouts now on top of non-stop protests (click on link above).  How can the Greek populace make their displeasure more obvious?  Subjecting ordinary citizens to recession to further support the bad decisions of wealthy investors is just plain wrong.  I’m surprised it’s gone this far! 

So what happens if the Vote of Confidence succeeds?  While it’s only a first step, it would clear a big hurdle towards getting additional bailout money.  It would also signal that further austerity would be implemented, directly against the wishes of the protestors. 

Given that we’ve had violent protests in the past, could a ‘Yes’ vote trigger mass violent protests in the days ahead as the political establishment effectively ignores the wishes of its people to bailout banksters? 

I posted this a few days ago.  It seems that Merkel’s political life is in danger and she’s in a terrible bind. 

If Germany doesn’t approve the long-term EU bailout mechanism expected by the financial markets, you’ll be hearing more Eurozone sovereign-debt problems in the near-term (a few months).