Eurozone crisis escalating again!

It appears that  recent intervention of China and Japan in supporting the escalating debt of the Euro zone via purchase of bonds has just managed to stop the hemorrhage for few weeks.
Bond vigilantes are back and they are punishing Europe again.
The European Central Bank (ECB) has stepped in to the financial markets to buy Portuguese bonds on Thursday amid growing fears that the eurozone's rolling crisis is about to claim its third victim.
Policymakers in Frankfurt intervened for the first time in three weeks as borrowing costs on Portugal's debt remained at a level that proved to be unsustainable for both Greece and Ireland.The ECB's attempt to reduce the tension was prompted by a rise in the yield on 10-year Portuguese bonds to 7.63% – the highest level since the country became a founder member of the single currency at the end of the 1990s.
The recent step in of China purchase of Euro Bonds has proven again how desperate the situation is in Europe and how ineffective is the political action on this escalating situation.
China is practically on a win-win situation, in one shot is diversifying its investments decoupling from the US Dollar toward the Euro but it is also gaining influence over Europe and at the same time buying pieces of the old continent. Greece has already relinquished control of its main port the Piraeus to China and Portugal, Ireland and Spain are following with concessions in exchange for being able to sustain few years more an unsustainable debt.
If the Chinese are farseeing in their decisions and actions, Europe is short-sighted and paralyzed by immediate cash-flow necessities and a lack of political vision. Europe is becoming more and more a spectator unable to make tough decisions and simply trying to move forward the day of reckoning.
In the meanwhile events are moving fast and this week a series of news are showing how the debt bomb countdown is speeding up:

  • Germany which has always opposed fast-track economic integration of the eurozone because of the fear that it would create a two-tier EU is now looking for an agreement by next month on policies aimed at harmonising corporation tax rates, retirement ages, national bank rescue plans, and the abolition of index-linking for wages in the 17 eurozone countries even if countries as diverse as the Netherlands, Slovenia, Belgium and Austria were already balking at the proposals. Needless to say what a corporate tax harmonization would mean for Ireland, unemployment in the battered Celtic country would skyrocket as international companies would flee the country.
  • Dominique Strauss-Kahn, managing director of the International Monetary Fund, has called for a new world currency that would challenge the dominance of the dollar and help curb future financial instability.Strauss-Kahn argued that the reserves that member countries held with the fund could be used, instead of the dollar, to price international trade. These so-called special drawing rights (SDRs) could also act as an alternative to the dollar in central banks' foreign currency reserves. "Using the SDR to price global trade and denominate financial assets would provide a buffer from exchange rate volatility," he said, while "issuing SDR-denominated bonds could create a potentially new class of reserve assets". Strauss-Kahn, who has been tipped as a contender for the French presidency next year, also argued that the way SDRs were valued, which is currently based on a basket of currencies – the dollar, sterling, the euro and the yen – be broadened to include others such as the Chinese yuan.
  • Ratings agency Moody's has downgraded the unguaranteed senior unsecured debt of six Irish banks and said it may also cut deposit ratings. The agency said it was taking the decision following recent statements by the Government that Moody's said call into question its willingness to provide any additional support to the banks beyond that provided to date. Moody's cut the unguaranteed senior unsecured debt ratings of the Bank of Ireland (BoI) to Ba1/Not-Prime from Baa2/P-2. AIB meanwhile was cut to Ba2 from Baa3. EBS Building Society (EBS) and Irish Life & Permanent (IL&P) debt ratings fell to Ba2/Not-Prime from Baa3/P-3. Anglo Irish Bank and Irish Nationwide Building Society have been cut to Caa1 from Ba3. The ratings agency also said the long-term unguaranteed senior unsecured debt ratings of these banks have been placed on review for further possible downgrade.