Italian bonds nearing 7.5%. The ECB stating that it will not be the 'lender of last resort.' Political upheaval.
To put it lightly, Europe had been a raging manic depressive lately. I'd like to hear some hypotheses/predictions for the Eurozone and it's future (or lack thereof). I've been analyzing this to death and could use some fresh perspective from monkey minds.
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I'd also like to hear what everyone has to say.
I think a complete restructure of the EU is obviously needed and based off what reuters reported today, it has already been discussed by EU leaders. It would, though, be an incredibly BOLD move to go through that process in today's environment so I find it more likely that the ECB goes against its mandate and becomes the "lender of last resort'. Unfortunately for these fks (and the world really), they still haven't realized that it has and will continue to get worse with every passing second. I wonder where we would be and what the markets would be focusing on today had they grabbed the bull by the horns in May of last year or much, much earlier. That's politics for you...
until recently, i was advocating that a double-dip in the US was unlikely, but as the sovereign debt fiasco unravels, this is becoming more likely. and it's sad, given that the crux of this crisis is political in nature - in other words, this is something that was largely avoidable - but the effects will be mostly economic. nobody had the political will to do what was right - long term structural reforms (as opposed to focusing solely short term austerity measures) that would truly bring down these countries' ridiculous debt levels.
while it's scary to think that the 8th largest economy has reached debt levels that are "totally unsustainable", the reality is even worse. banks are the channels through which this crisis will spread, and even germany is in a precarious position as a result. whether the EU disintegrates as a political entity is less worrisome than europe sinking into another recession. it still comprises the greadest % of global GDP (if i'm not mistaken), and the US - as well as the rest of the world - will be hit pretty hard. just as we beat one cancer, another one is beginning to surface.
would also like to hear what others in this space think.
cheers
With Trichet out then there's a chance that the ECB might step in. If/when that happens though chances are its too little too late with all the posturing going on.
I honestly don't see any way out for them at this stage but its hard to stick a fork in them because no one can figure out what the catalyst would be for it all to go tumbling down.
Illini Programmer had a really good take on this: Worst case scenario, Greece or Italy defaults and becomes like Argentina. How is this the end of the world?
I don't think it will be, but people will act as if it is for a bit. Then is your buying opportunity!
it's not the end of the world, but certainly to the end of EU
wanna go check out how much Italian debt that French banks have? How would EFSF work if Italy blow up?
It's a chain reaction about to blow up due to inability to print and yet the desire to borrow more debt to service debt
This is part of the centralization and standardization of the Eurozone. While the EU may or may not survive, more importantly is the region as a whole starting to actually participate in collective decision making. The EU is almost acting like a functioning federation. It reminds me of the period of US history from about 1870-1920, where the disparate states really began to go to Washington to get shit done.
Ultimately, the European political structure is going to have a more centralized decision making capability, and at this point the various nations are pushing and pulling to see how far this goes and what issues. Keep in mind that the last few decades are the first period of extended peace in European history: for all of their cultural pretentiousness, Europe has been little more than a war zone for most of its history. The adjustment is bumpy, for sure, but at the same time it's safe to say that the level of dialogue sans violence is new to Europe and they're inexperienced with federation government.....REGARDLESS of how much they may be more democratic at the local and nation-state level.
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