Political Consensus Is Fraying in Europe

Signs of the fraying of political consensus in Europe are showing up again this morning:

1) Was Mariano Rajoy straight with Spanish voters? The Spanish prime minister insisted over the weekend that Spain's banking bailout would come with no strings — no troika (European Union, European Central Bank , and International Monetary Fund ) supervisors. But apparently that is not the case. Germany said that there will be outside inspectors overseeing the loans, just like the other bailouts. Hm.

2) You need a bigger boat: Fitch bluntly said what the markets reflected yesterday: That muddling through is not good enough. It said that all sovereign credit ratings in Europe —including the four remaining AAA-rated members — risk downgrades unless they find a more lasting solution to the euro zone crisis; that follows Moody's warning.

3) You gotta love Fekter: Maria Fekter is Austria's finance minister and she can't keep her mouth shut. In a TV interview, she bluntly said that Italy may be next for a bailout. That's not exactly shocking, but in the polite world of the EU it is really talking out of turn.

4) Today, a raft of EU officials called for creation of a "banking union." The word "banking union" has become the new fashionable phrase in Europe, replacing long-term refinancing operations (LTROs). But what exactly is a banking union? Near as I can tell, it's a hash of various proposals: deposit guarantees, a resolution fund for ailing banks, and unified regulatory oversight across the entire European Union. That's all 27 countries, not just the 17 countries in the euro zone. Good luck.

5) German Chancellor Angela Merkel again reiterated opposition to Eurobonds, but did say, "We want more Europe," but that to get it "we must be prepared to give up national sovereignty."

Elsewhere:

1) India's industrial output flatlined in April. What happened to the great growth engine that was supposed to be India? Poor governance and a stifling bureaucracy seem to be doing it in.

Remember when BRIC (Brazil, Russia, India and China) was a magic word that conjured growth, progress, and hope? Yesterday Standard & Poor's said India may become the first of the BRIC countries to lose its investment grade credit rating due to its refusal to adopt more economic liberalization.

—By CNBC’s Bob Pisani

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