Eurozone debt crisis: this time, trouble over the channel is deadly serious

Thursday, November 10, 2011
By Paul Martin

The eurozone debt crisis is fast approaching its denouement.
09 Nov 2011

Greece, Ireland, and Portugal — these were all serious events, but they were too small in themselves to bring matters to a head. But Italy, the eurozone’s third largest economy — both “too big to fail” and “too big to bail” — matters.

Eurozone policy-makers hoped to build a firewall around Italy, to prevent its cost of borrowing from following the others to unaffordable levels. They failed, as they were always doomed to with the wholly inappropriate set of remedies they had applied to the problem.

On Wednesday, yields on Italian bonds jumped by the sort of margin hitherto reserved only for emerging market basket cases. Rarely, if ever, has a member of the G7 been subjected to such a humiliating vote of no confidence.

It has taken less than a week for the Cannes summit to prove itself wholly irrelevant. The promised resignation of Silvio Berlusconi has also failed to restore confidence to battered markets.
Everyone is now looking towards the European Central Bank to deliver the “big bazooka” necessary to stem the crisis, but to do so it is going to take a dramatic change in stance.

The Rest…HERE

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