The desperation is palpable - yesterday's price action in European equities indicates a market completely unhinged. The clear message after witnessing another failed EU trial balloon - a non-starter bank union plan this time - is that we are now into a stage of exceptionalism. As with the days following the Lehman collapse, similarly drastic measures are now required from the ECB. Treaties, philosophical differences and principles will have to be set aside for the largest liquidity dump the world has ever seen.
Unfortunately more pain will occur to jolt the European bureaucrats into action. Perhaps it will take Spanish 10 year yields to 8%. However, the only thing that will save Greek and Spanish banks now is a wholesale deposit guarantee. Until then the pace of withdrawals and currency shortages will increase. Already the Greek Public Gas Corporation (DEPA) is predicting an early June blackouts as utilities have failed to pay their bills to tune of €300m. A lack of bank guarantees means that Greece is now buying their oil from the charitable people at Glencore at an additional cost of €2.2m a month. When a commodities trader is applying pariah-state financing methods to member of the EU, it signals a need for drastic action.