Germany has taken control of Europe’s sovereign debt crisis, Cramer noted Tuesday, adding German policymakers have essentially told troubled countries, “give me austerity and I will give you growth.” In turn, the U.S. stock market was able to rally Tuesday despite downgrades of key countries over the weekend.
German leaders are telling troubled nations that to get help, they must first get their house in order. That’s how Spain’s borrowing costs went down as Italy’s were held in check. Both countries are implementing austerity programs that are hurting their growth, but neither will be cut loose like Greece. To Cramer, it seems Italy and Spain are willing to take a hit of a recession in order to appease the Germans. In turn, the Germans will help them get back on their feet without ever having to cut them a blank check.
“There’s been a recognition by the Germans that stock markets matter, that the banks matter, too, and if they can lift their banks and their stock markets, then they can put a stop to the heavy supply of regurgitated bonds that flooded the bond markets over and over again,” Cramer observed. “Once you clean out that supply by forcing the banks to be more creative and issue equity … you defeat the bond vigilantes, who have pushed interest rates so high over in Europe."Page 1 of 3 | Next Page