In the last post on the EU, I said that the EFSF is too small. Basically, only the ECB has unlimited liquidity in its arsenal to deal with contagion to Spain and Italy. Willem Buiter agrees and has spoken to Bloomberg about his analysis of the Greek bailout deal.
Notice that Mr. Buiter says the debt swap is a good deal for the banks and a bad one for Greece as it worsens Greece’s longer-term solvency position.
Video below