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Germany's Merkel 'as Houdini': Magically Saving Euro Zone?

Merkel as Houdini. The risk now is in Germany. German Chancellor Angela Merkel must now turn to the Bundestag's budget committee on Tuesday to get approval of the EFSF expansion...but what's the deal? It hasn't been announced, but she must know what it is.

Then she must go in front of the full Bundestag on Wednesday, where there will be full vote and perhaps even a prolonged debate.

Then she has to return to the EU Summit and announce the "deal"...the same day!

That is pretty tight! Little wonder there are rumors the final summit could be postponed.

What does the market think? Stocks are holding but sovereign spreads are continuing to widen.

Who's right? "Equity guys are notoriously bad at judging politics," one trader wrote to me this morning. "We are trading basically the same way we did when we got a 'final' resolution to Greece back in July, and that worked out rather badly."

Others point out that U.S. and China economic data is not as bad as thought, that earnings are not as bad as feared, that stocks here are not just trading on Europe.

Still, is this Merkel as Houdini, pulling herself...and the EFSF...out of trouble at just the last minute? Merkel has warned us several times to temper our expectations. We are unlikely to get 60 percent haircuts on Greek debt, 200 billion euro bank recapitalizations, and 2 trillion leveraging of the EFSF.

But traders don't seem to be paying attention: "We don't believe her because that won't get us paid," another trader wrote. "She isn't pretending to be Houdini about anything...we are just not listening."

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