Jonathon Trugman

Jonathon Trugman

Business

Europe on the ropes

Here’s just how robust and healthy the global financial markets really are.

On Wednesday, the Fed laid out a clear plan that Janet Yellen and Co. will be tapering at full speed ahead.

Hours later, when European markets were able to react, it’s back in a full-on banking crisis again.

Thursday morning, the largest bank in Portugal — Espirito Santo International — shuttered and shares plummeted 17.2 percent before trading was suspended.

Now, it’s impossible to attribute causation to the Federal Open Market Committee (FOMC) minutes, which punctuated the end of much- needed liquity for banks worldwide in October, but it’s beyond pedestrian to believe in such a coincidence, either.

While the Fed has been greasing the gears of the global financial system with its Quantitative Easing programs, the European Central Bank (ECB) talked and talked and talked but it never really acted — Mario Draghi and the past presidents just uttered the words “The ECB will do whatever it takes.”

Europe talked a good game and then sat back and let our Fed and Treasury Department backstop the global financial system, which included the essential underwriting of the ECB and European banking system.

As sure as they would call me a “Stupid American” and throw their berets at me for saying that, it’s true.

And it will continue to be true until Europe commits capital to its own banking system to replace the capital that was drained by the crisis.

Certainly there’s more than a single Portuguese bank that will find itself with a constricted balance sheet due to lack of liquidity.

If Draghi doesn’t open up the ECB’s purse strings and begin to expand its balance sheet through a European version of quantitative easing and a bank capital injection program, not only will Europeans suffer, but it could ultimately tip the shaky US economy back into recession.

Ant that would require Uncle Sam to ride to the rescue once again.