And, as Quatremer says, the FT is the only paper read by market operators. So they set the conventional wisdom. And conventional wisdom is what markets reflect.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

They could have bid more if they wanted a bigger share of the pie. That's what a market is about, isn't it?

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

There's an interesting coincidence, however, between the €25bn bid for the debt offering, and the supposed €25bn offer to China mediated by GS.

Iceland imploded because of its foreign currency exposure - that is not going to happen to the Eurozone countries in any event.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

I'd need to get more info on the reasoning here, because I don't see anything [Europe.Is.Doomed^TM Alert] about noting that the IMF is ill-equipped to help European countries.

Caution: this is a long post (about 3,000 words).  The main points are in the first few hundred words and the remainder is supportive detail.  This material was the basis of testimony to the Senate Budget Committee today by Simon Johnson.

A.    Main Points

...

2. But thinking in terms of these headline numbers masks a much more worrying dynamic.  A major sovereign debt crisis is gathering steam in Europe, focused for now on the weaker countries in the eurozone, but with the potential to spillover also to the United Kingdom.  These further financial market disruptions will not only slow the European economies - we estimate growth in the euro area will fall to around 0.5 percent Q4 on Q4 (the IMF puts this at 1.1 percent, but the January World Economic Outlook update was prepared before the Greek crisis broke in earnest) - it will also cause the euro to weaken and lower growth around the world.
   
3. There are some European efforts underway to limit debt crisis to Greece and to prevent the further spread of damage.  But these efforts are too little and too late.  The IMF also cannot be expected to play any meaningful role in the near term.  Portugal, Ireland, Italy, Greece, and Spain - a group known to the markets as PIIGS, will all come under severe pressure from speculative attacks on their credit.  These attacks are motivated by fiscal weakness and made possible by the reluctance of relatively strong European countries to help out the PIIGS.  (Section B below has more detail.)
   
4. Financial market participants buy and sell insurance for sovereign and bank debt through the credit default swap market.  None of the opaqueness of the credit default swap market has been addressed since the crisis of September 2008, so it is hard to know what happens as governments further lose their credit worthiness.  Generalized counter-party risk - the fear that an insurer will fail and thus bring down all connected banks - is again on the table, as it was after the collapse of Lehman.
   
5. Another Lehman/AIG-type situation lurks somewhere on the European continent, and again G7 (and G20) leaders are slow to see the risk.  This time, given that they already used almost all their scope for fiscal stimulus, it will be considerably more difficult for governments to respond effectively if the crisis comes.
   
6. In such a situation, we should expect that investors scramble for the safest assets available - "cash", which means short-term US government securities.  It is not that the US has anything approaching a credible medium-term fiscal framework, but everyone else is in much worse shape.
   

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