Finally, little by little, the fog of toddler-like euphoria over any and every most recent European bailout plan is starting to lift, this time with the S&P finally speaking up and reminding everyone of what they already know: namely that an expansion of that now-daily deux ex machina, the EFSF, will "potentially trigger credit rating downgrades in the region, a top Standard & Poor's official warned. David Beers, the head of S&P's sovereign rating group, said it is still too soon to know how European policymakers will boost the European Financial Stability Facility, how effective that will be and its possible credit implications....But he said the various alternatives could have "potential credit implications in different ways," including for leading euro zone countries such as France and Germany." Get that? As Zero Hedge said back on July 21, the European bailout Catch 22 is now once again front and center, namely that any expansion in the EFSF will lead to a downgrade in one of the two Eurocore countries, France or Germany, and should France get cut from AAA (which it will), the entire burden of footing the European bailout bill will fall on Germany. And if Germany is also downgraded to AA, kiss your SPV CDO goodbye, and with it Europe. Which means that while we will hear many more threats by both and against S&P, more posturing that the EFSF will be enhanced to tens if not hundreds of trillions with virtually unlimited leverage, however idiotic those may be, the end result is just one: whether or not Germany risks a full blown government collapse by instituting the only thing that has a chance of containing the crisis - EuroBonds. Of course, shoul those come to be, the German Pirate party will very soon have an absolute majority in the German parliament... and shortly thereafter in various previously unheard of beer halls.

Some choice S&P quotes from Reuters:

"There is some recognition in the euro zone that there is no cheap, risk-free leveraging options for the EFSF any more," Beers told Reuters. "We're getting to a point where the guarantee approach of the sort that the EFSF highlights is running out of road." Beers said in an interview late on Saturday. Beers declined to comment on implications of each of the scenarios for boosting the EFSF. However, one option could involve backing up the fund with money from the European Central Bank, eliminating the need for politically unpopular cash injections from hard-up European governments. That solution, although potentially reducing the impact on sovereign ratings, would probably increase liabilities in the ECB's balance sheet and possibly leave euro zone countries on the hook for restoring the bank's capital in the event of losses caused by an euro zone default. Leveraging the EFSF could also result in a downgrade of its own AAA credit rating. S&P, which cut Greece's credit rating deeper into junk territory in July, believes European policymakers are also finally realizing that Greece's debt restructuring will take place with significant haircuts. "Therefore, there are going to be some banks that might require additional capital," Beers said. S&P believes, however, that banks can still raise money in the market rather than relying only on government support. "The banks have to go out and talk with potential investors. There have been interesting developments this year, certainly banks in Europe have been raising capital," Beers said in the interview. "If governments are unable to focus on the long-standing impediments to growth, then austerity alone is not going to give you growth," Beers said, citing the case of Italy. He also had a warning for Germany. Many economists, he said, had initially overestimated the country's growth performance for this year and are finally realizing that its fate is "inexorably linked to that of all its neighbors."

So yes. Catch 22 coupled with a lose-lose outcome. And Chinabot is buying the EURUSD, again, why?