Ominous noises are being made about Portuguese, Spanish and now Belgian sovereign debt. Downgrades by the rating agencies are coming thick and fast. There has been more serious civil unrest in Greece following cuts in public sector pay that puts our little student demo in the shade. Civil unrest in a nation's capital is always bad news for the incumbent government as it implies they are not in charge of their own capital.
Political risk is starting to dominate even in Belgium without a government for many months and with a debt to GDP ratio of Spanish or even UK proportions. This is starting to put real pressure on the Euro. Spanish bond spreads have jumped 100 bps in just a month. J C Trichet wants a 'quasi fiscal union' whatever that is to stabilise the Eurozone debt markets. The ECB itself may be insolvent under strict accounting rules. Their whole approach will go through under article 48 of the Lisbon Treaty that Brown signed in isolation on our behalf.
Merkel cannot sell a fiscal union of any sort to the Germans but what off the UK. The Lib Dems will do anything the Eurocrats ask, indeed their idiotic SW MEP Watson boasts of putting through the European Arrest Warrant, the one the Swedes re using to try and extradite Assenge with no doubt to eventually hand him over to the Yanks. The Tories won't agree to fiscal union, quasi or otherwise. Clegg will be wiped out at the Oldham by-election by Labour in early January. No wonder he looked sick at today's PMQs.
Another General Election in spring 2011 is a distinct possibility. Are you ready UKIP?