The NYT's Paul Krugman titles his latest post on the subject "Eurodämmerung" and it fits. We're finally watching the last of this years-in-the-making opera. It's ending like a tawdry family blame-game ... with deaths in the final act.
Things are falling apart in Europe; the center is not holding. Papandreou is going to hold a referendum; the vote will be no. Italian 10-years at 6.29 at pixel time; that’s a level at which the cost of rolling over the existing debt will force a default, even though Italy has a primary surplus. And with everyone simultaneously pushing for fiscal austerity, a recession seems almost certain, aggravating all of the continent’s problems.After discussion of how they got there — we know the answer to that, don't we — he closes thus (my emphasis):
The question I’m trying to answer right now is how the final act will be played. At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro. This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira.And ...
Next stop, France.Look out below. My suggestion, watch the euro charts.
GP
