contagion

Implicit in my post explaining that Germany is preparing for Greek bankruptcy is the view amongst European policy makers that default does not equal euro zone exit. I think I should reiterate this because a lot of people are acting like an…

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…

Speculation of some agreement has helped lift the euro, peripheral bonds, and generally has underpinned the risk appetite in recent days. This leaves the market vulnerable to disappointment or a "buy the rumor sell the fact" type of…

I believe the sovereign debt crisis will deteriorate further. And then we will just have to see what the politics of the individual countries in Euroland look like. If austerity brings the economy to a crawl and europopulism is well…

Contagion in the sovereign debt crisis has already spread to Spain and Italy. David Blanchflower believes it may spread yet further to France. On Bloomberg, Blanchflower led off saying this would not be surprising, pointing to the dithering…

The contagion to Italy is a turning point in the euro zone crisis. I feel we have reached a point where the wrong decisions could mean disaster. However, I continue to hope that the Europeans will recognize how destructive the current…

Clearly, the Europeans’ dithering has had catastrophic consequences. The extend and pretend strategy has not prevented contagion from infecting the core. So we need to see a response here. In the shorter-term, the Europeans are likely to…

Tolstoy tells us in the first line of Anna Karenina that "Happy families are all alike; every unhappy family is unhappy in its own way." This is directly applicable to Europe. It is easy to tar all (growing) peripheral countries with the…

The problem is if “markets become skittish about Spain or Italy, which cannot be bailed out. So EU leaders will cut Greece loose” and indeed, there is talk about doing just that – allowing Greece to default. The policy of extend and pretend…

As Michael Lewitt says, "the interconnected nature of global financial markets render Europe's problems the world's problems. There is no longer any periphery."