EUROPEAN MORNING (news) DUMP: Germany Now OK with Expanding Rescue Facility—Santander CEO Guilty of Fraud

So today 5pm in Brussels, the European finance ministers are going to be discussing expanding and revamping the European Financial Stability Facility (EFSF) mechanism, the €440 ($585) billion rescue fund.

If you feel dizzy at the sight of it,
you’re not alone.

Even Germany is in on this game . . . well actually, Germany had to be in on this game: It’s the Big Kahuna of the eurozone, but up to last week, Germany wasn’t on board. To European Commision head José Barroso’s suggestion that the eurozone beef up the EFSF and perhaps even start to issue a single sovereign debt, both German and France were publicly quite cool and/or dismissive about it.

But now? The successful bond sales of both Portguese and Spanish debt last week seems to have given more impetus to Barroso’s idea. So this afternoo, Germany’s finance minister, Wolfgang Schaeuble, is joining the other eurozone FM’s to talk about expanding the EFSF—and though Schaeuble isn’t going to the meet kicking and screaming, he’s not exactly running to it either, publicly resisting a call by Barroso to have a rescue structure in place by Feb. 4.

Why Feb. 4? Why that’s obvious—Spain. Though Portugal is hopping up and down like a midget on a pogo stick, telling everyone that last week’s successful bond auction shows its finances are aces, Spain is very silent—ominously silent—even though their bond auction was good.

Spain is why everyone is worried.

And the news from Spain this morning isn’t urgent, but it ain’t good either: The Spanish Supreme Court just convicted Banco Santander’s CEO Alfredo Saenz of fraud, for his work back in 1994, when he was chairman of Banco Español de Crédito.

This is serious because the fraud conviction means Saenz will have to resign immediately from his position at Santander—and there is no wriggle room for legal appeals, as this is the highest court in Spain.

So Santander—Spain’s largest bank along with BBVA—will be headless as of now.

Why this matters is, everyone is very worried about Spain’s banks, especially the regional ones, to which Santander has big exposure. Willem Buiter, Citigroup’s chief economist, gave an interview saying as much, adding that the EFSF ought to be expanded to “about €2 trillion”.

Could be something, could be nothing—stay tuned.

Also, Brian Cowen, Ireland’s Prime Minister, is going to be facing a leadership challenge. Cowen put the confidence vote on the table, and had the support of 45 of his Fianna Fáil’s 70 MP’s—but this morning, his own foreign minister, Michael Martin, said he would not be voting for Cowen (the voting is secret). Martin is well-regarded, so his opposition might embolden others.