I think people have started to realize the latest Euro bailout is just smoke and mirrors

It appears that Euro Bailout v. 26 is starting to fail.  The yield on the Spanish 10 year is up about 20 bps off its intraday low, as are the yields of other Euro periphery bonds.  What's up with that?  I thought the latest Euro bailout was a one way ticket to solvency as the Germans have been forced to buckle under the pressure from just about every other country in Europe?  Not so much.  Just take a look at the actual text of the bailout "agreement":

We ask the Council to consider these Proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB, for banks in the euro area the ESM could, following a regular decision, have the possibility to recapitalize banks directly.

This would rely on appropriate conditionality, including compliance with state aid rules, which should be institution-specific, sector-specific or economy-wide and would be formalised in a Memorandum of Understanding.

In other words, in the next 6 months we hope that this plan for bank aid from a non-existent mechanism (the ESM has yet to be ratified) is considered and god knows when it will be actually implemented or if any country is willing to go through all of the hoops that the northern countries will demand as a pre-condition.  Not very reassuring is it?

Also, who knows if the ESM money can actually be raised (show of hands, how many people want to buy debt of Italian banks at below market yields?  Obviously not that many or the market would already be at that price, not several percent higher).  It is worth noting that no new funds were actually promised to a bailout, simply the method that they could be dispersed was possibly expanded.  That could be a sign that governments weren't quite sure if additional funds COULD be raised.

And finally, and possibly most importantly, given that the US ISM survey just signaled that the US manufacturing sector is entering a recession, economic conditions may deteriorate markedly in the next six months.  There could be quite a few more governments and banking systems needing a bailout at that point.

No wonder this "bailout" is starting to fail, just one full day after it was announced.