The events over the last week have taken Spain’s PM Mariano Rajoy to the edge of the abyss.
Should Germany succumb, the world probably will experience a short-term boom before sliding into a long and severe period of depression, hyperinflation and ultimately stagflation.
For Germany, leaving the eurozone would be a decidedly winning move.
In view of the deflation that is coming to the deficit countries, having German inflation rise above average is as inevitable as it is useless.
Just like Rome wasn’t built in a day, the Eurozone won’t be destroyed in a day, but it is on a path that leads to eventual dismantling.
The Q1 German Private Equity Barometer reports better sentiment.
I continue to believe that longer dated Spanish and Italian bonds are poised for a significant sell-off.
The question is not whether to give priority to fiscal austerity or economic growth but to find the optimal degree of austerity and structural reforms for the maximisation of confidence.
Increasingly, the future of the euro appears to be influenced not just by debt default, but also by the politics of bailouts and austerity.
Direct ESM assistance to banks would only be politically acceptable if EU member states were prepared to transfer authority for banking supervision to the EU level.
Interview with CNN’s Christian Amanpour on the the theme of Europe’s slow suicide by inane austerity.
The ECB’s two LTROs had vastly lifted market sentiment and made refinancing at reasonable rates possible again for EU banks.