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3 Reasons the European Bailout Could Fold Like a Cheap Tent

NEW YORK ( TheStreet) -- The equity markets are rocketing up in jubilation as traders celebrate the European Union's plan to address the continent's banking crisis and put its sovereign debt issues behind it.

But far from solving the issue, the announcement out of Brussels is full of holes, mind-blowing assumptions and downright fiction that will put Europe on a crash course with economic growth and stability for the next decade.

In a research note issued by JPMorgan Chase (JPM) on Thursday appropriately titled "EU Delivers a Little on a Lot of Fronts," the analyst summarizes the key parts of the deal as:

  • Banks will need to raise capital levels to 9% by June 2012;
  • The EU will leverage up a new China-backed bailout fund to achieve ¿1trillion of lending;
  • A "voluntary" bond exchange with a 50% haircut for privately held Greek government debt;
  • The EU will pursue term funding guarantees for banks.

Each proposals sound rational and it looks like this was exactly what the market wants to hear. Unfortunately, when you dig in on the details, the solution may actually make the problems worse

Here are just three reasons the European bailout will fold like a cheap tent:

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