Today's Major Market Move: Spanish CDS Rise 35% Since Nov 1

As European CDS continue to rise higher, two of the worst performers (higher price = increased default risk) have been Austrian (which we discussed here) and Spanish swaps.

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Despite apparent 'progress' in dealing with the European economic crisis (G-Pap and Silivo stepping down, reaffirmation of commitment to austerity measures, EFSF expanision, continued ECB bond buying) many European CDS prices have climbed higher.

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The most ominous line in that chart is red (France). The market is slowly coming to the realization that between the bailout-ors and the bailout-ees, the only valid member of the bailout-or group is Germany. Furthermore, Germany is mathematically incapable of backstopping the entirety of the rest of the Eurozone. As a result of this realization, we have companies like Deutsche Bank pleading with the ECB to go all-in on money printing. Zerohedge obtained a copy of a recent presentation made by DB analysts in which it was stated:

And here is what DB thinks has to be done right now.

• More progress on credible fiscal austerity (especially Italy)
• Rapid resolution of the EMU's original sin - lack of fiscal integration (Dec 9 EU Summit meeting)
• Restore confidence to re-open bank funding markets
• Time to expedite the "Grand Plan"
  • Larger Greece debt restructuring
  • Bank capital raises and debt guarantees
  • Additional bail-out funds for Greece
• Time to call the ECB
  • Investor reluctance on EFSF € 1 trillion leverage plan
  • Ineffectiveness of ECB monetary policy transmission mechanism to keep bond yields low
  • Adjustment away from current bond purchase program needed (away from temporary, limited and sterilized)
  • ECB should announce large, targeted buying plan (i.e. € 200 bn over 12 months)

The 2 key items are in bold. This is just another example of attempting to avoid near term pain for what in all probability will end up being a larger crisis down the road. Does this fundamentally alter what is the equivalent value in oil of a lifetime salary, including pension, of a Greek hairdresser? Can the European technocrats engineer a solution where the annual labor of all the Italian bureaucrats when valued in gold, is sustained? I believe there are primal, fundamental economic forces currently at work that no amount of central bank asset purchases or interest rate massaging will be able to bring to a halt.