Breaking headlines out of Europe indicate that EU may very well be on the brink. These days, headlines move markets and capital flows. If the problems in Europe are perceived to be as bad as things actually are, we may see the next leg in the crisis unfold in coming days and weeks, as we discussed in Is a Monster Reversal In Stocks, Commodities, and the US Dollar in the Works?

After repeated denials from Ireland about the necessity for an EU bailout, mounting pressure from the rest of the Union may finally force the Irish to buckle.

Portugal, which is pushing for Ireland to “do the right thing” and take the bailout, itself is in jeopardy of getting hit.

Greece – nothing new here, other than the media finally deciding to report on the continuing saga.

Headlines and news from Europe as the situation unfolds:

Dublin has so far admitted to holding talks over “market conditions” with EU partners but insists that it is fully-funded until June and hopes to calm nerves with €6bn (£5.1bn) of budget cuts in early December. –Telegraph

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An increasingly isolated Irish government was coming under mounting pressure tonight to seek an EU or International Monetary Fund bailout within 24 hours amid fears that contagion from its crippled banking sector might spread through the weaker eurozone countries. –Guardian

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Ireland signalled a willingness to weigh European Union measures to aid its banks, potentially abandoning a go-it-alone defense to prevent a resurgent debt crisis from destabilizing the euro. –Bloomberg News

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The euro is facing an unprecedented crisis after another country indicated on Monday night that it was at a “high risk” of requiring an international bail-out. Portugal became the latest European nation to admit it was on the brink of seeking help from Brussels after Ireland confirmed it had begun preliminary talks over its debt problems. –Montreal Gazette

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Greece’s goal of reducing its gargantuan debt received a fresh blow today when the EU statistics agency announced that the country’s 2009 budget deficit was much worse than first thought. Six months after Athens received €110bn (£93bn) in emergency loans from EU nations and the International Monetary Fund to prop up its near-bankrupt economy, Eurostat revealed that Greece’s budget deficit reached 15.4% of GDP last year, substantially higher than its previous estimate of 13.6%. –Guardian

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Angela Merkel, the German Chancellor, raised the spectre of the euro collapsing as she warned: “If the euro fails, then Europe fails.” –Montreal Gazette

Whether the EU bailouts will be enough to stem the flow of capital out of Europe and into the US Dollar remains to be seen. The Europeans saved the system from a major collapse when they bailed out Greece earlier this year and global media touted it as another success on the road to recovery, but will they be able to do it again?

There has been lots of talk of a weakening dollar and continued inflation, especially in relation to asset classes like equities and commodities which have seen major upward momentum for the last 18 months. But could it have been yet another mind game from the financiers and medial moguls behind the scenes? If the world becomes convinced that Europe is on the brink, it could mean serious money flows out of the Euro and into US debt-based assets (Treasuries, etc.). The Chinese would get their wish for a stronger dollar (as compared to where it was last week), the Federal government would have buyers for US debt, and those on the inside who positioned themselves appropriately will make yet another killing in the markets.

For now, and this is subject to change at the whims of our acronymic news outlets, it looks like money has been piling back into what may be perceived by panicked investors as the last bastion of monetary safety:

The dollar hit a six-week high against the euro on Tuesday, extending gains after U.S. Treasury yields jumped as investors closed out bets before market liquidity declines toward the year-end.

The 10-year U.S. Treasury yield soared 17 basis points on Monday for its biggest one-day rise since June 2009, giving a broad lift to the greenback.

Besides the rise in U.S. yields, the euro was hurt by worries about fiscal troubles in Ireland and Portugal, with investors focusing on meetings of European finance officials on Tuesday and Wednesday.

–Reuters

Predicting the outcome of government in crisis and their machinations is nearly impossible because of the multitude of variables and possibilities. Volatility, not just in financial markets, but all aspects of our intertwined global economy and geopolitical systems should be expected.

Be ready for pretty much anything at this point.