the corner office

a blog, by Colin Pretorius

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Sovereign debt II

I'm no Paul Krugman fan but I wouldn't argue with this:

So, a credit line at 5.8 percent interest. Considering that Ireland was able to borrow at that rate as recently as mid-September, and was falling off a cliff then, why is this supposed to solve the problem?

The Telegraph financial columnists crank out pretty good articles and background on the crisis every day. Ambrose Evans-Pritchard today:

Madrid must attract €226bn of good money from Spanish savers, German pension funds, French banks, Japanese life insurers, and China’s central bank, so that an incompetent government (this one happens to be socialist, but the Greek conservatives were worse) can continue to run budget deficits of 7pc to 8pc of GDP in 2011. Why should they lend a single pfennig, having already been told by EU leaders that they will face scalping if Spain ever needs a rescue?

One of two outcomes seem possible now, neither of which is pretty: dissolution of the euro, which would cause a great deal of pain but leave countries with a fighting chance of recovering, or greater fiscal and political union, in which case it would be very difficult not to regard it as half of Europe becoming de facto provinces of Germany. The irony.

{2010.11.29 - 15:05}


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