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It appears the market focus may infact be passing Portugal by for now, and focusing directly on Spain, “the Biggest of the PIIGS”, in trouble at the moment.

Moody’s kicked off the fun Wednesday, with an announced threat to downgrade the Spainish debt again.  Today, Spain went to the bond markets and found that demand had dropped and the cost of debt to issue had gone up again.

Their attempt to sell 3 Billion euros turned into an issue of 2.4 Billion Euros at significantly higher rates than the last issue a few weeks ago.  The market has realistically cut the PIIGS off from additional private funding.  The ECB either directly or indirectly was the bidder most likely.

The latest conversations out of Germany and the issuing of Euro Bonds has not changed, they along with France believe the issue is D.O.A. at the two day summit this week of EU leaders.  While it looks like things can last until the holidays are out of the way, to me, it appears that in January or Febuary, the latest crisis that is building up will come to a boil.

The market is not going to like recieving haircuts, but it also knows that it is the very defination of insanity to loan these governments any more money.  The Bond Vigelants in Europe need to ride to the rescue.  The FED and the ECB are loosing control of the fiat based dragon they have been riding for the last decade.

The next act in the “Euro Crisis” play, will most likely have real world resolution written into its.  Basically, will the path of Iceland and debt repugnation with real growth be the solution, or will Ireland and the mortgaging of their future youth be the accepted solution.

The EU could rescue Portugal, but everyone realizes Spain is realistically To Big To Fail, and To Big To Bail Out.  What comes next, no one knows.