The three stages of delusion by Dylan Grice and the London Brief by Omar Sayed, both on Europe. via Outside the Box.
Grice: Simply expanding it in its current form so that the ‘solvent core’ commits to raise yet more funds for the ‘insolvent periphery’ fails to address the risk that as more dominos fall the bailers shrink relative to the bailees (Italy and Spain combined – who’s spreads have been blowing out this week – are combined bigger than Germany). At what point does the insolvent periphery include so many countries that markets lose confidence in the solvency of the shrinking core to bail them out. Leaving aside for now the unpleasant reality that the solvent core might not actually be so solvent, perhaps the spread between ‘insolvent’ Greece and solvent France should be narrower? I wish I knew. In the absence of ECB printing, I suspect we’re going to find out.
Sayed: So in order to preserve this unholy union, what options does the EU have? I see four: (1) the Marshall Plan II; (2) the Treaty of Versailles II; (3) the printing press option and (4) the Icelandic option. Each has its challenges and problems.
as for me, I think that Texans and Nebraskans have no choice but to support Californians and Illini, as they're already part of a fully-integrated fiscal-monetary-social-policitical union; Germans and Dutch have a choice regarding supporting Greeks and Portugese. Without a true fiscal and political union, how can a monetary union with such disparate member states actually operate effectively over the long-term?
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