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European 'Crisis Tennis' Again

Another day of "crisis tennis." I know you're all obsessed with Facebook, but pay more attention to Europe.

Crisis tennis is this: every day we go back and forth between the two extremes: 1) the worry about the failure to do something about the excessive debt in the world, and 2) the desire to get the world's central banks—and sovereign governments—to keep stimulus spending going.

The markets have been rallying in the past day and a half on hopes that China and Europe would find some magic bullet to spur global growth.

That is a fragile hope, as we saw late in the day.

When former Greek Prime Minister Lucas Papademos said, at 3:29pm ET, that an exit from the euro was being considered, the euro dropped and the Dow lost 50 points. Almost immediately. He also said that an exit from the euro would be "catastrophic" for Greece.

This is political brinkmanship of a high order: Papademos wants to create a coalition of political parties during the upcoming Greek election that will 1) support the bailout program, and 2) imply that they will somehow squeeze more money out of Europe.

Papademos is not over-reaching: he has acknowledged that the room to renegotiate the Greek bailout was "very limited."

The European bulls are betting he can pull off a coalition that keeps Greece in the euro-zone. It looks 50-50.

And the EU summit tomorrow? We will see big intentions collide with political reality. Calls for eurobonds will be rebuffed by constitutional limitations in Germany and other countries, as will calls for expanding the ECB mandate. There will be plenty of efforts to find funding for bilateral infrastructure projects, but the money has to come from somewhere, and that money is hard to find.

We are moving toward an obvious end: the ECB will become the lender of last resort, to everyone.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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