Ouch.

  Very simply, the facts of the current environment in Europe don’t equal the conclusion that a coordinated effort will restore confidence. The fact of the matter is that European Sovereigns are massively indebted and European banks are massively under-capitalized. The proposed solution of raising capital and issuing fresh debt to solve this issue is a joke. If I walk away from a home I owe $200k on and its fair market value is $100k (a 50% haircut), does a loan to my bank for $100K from the institution overseeing it change the impairment? No. You’re shuffling the cards. Instead of taking a $100k loss, they now have an asset worth $100k and a new liability of $100k. The asset is still worth $100k. Even though their little maneuver technically gives them an asset of $100k and cash of $100k, my bank now has $100K less to lend against. Thus, their leverage increases.

via www.zerohedge.com