The Sovereign Debt Crisis and the Euro Area

The Bank of Italy has released a set of research papers on various dimensions of the euro crisis – here.

2 replies on “The Sovereign Debt Crisis and the Euro Area”

another dimension:

German elections 2013:
Merkel has ‘Europe at her feet’
23 September 2013 PresseuropRzeczpospolita, Les Echos, La Stampa & 4 others

Winning a third mandate with a performance that fell just short of an absolute majority: in the wake of September 22 general elections, the German Chancellor will be stronger than ever in her own country and also on the continent. The European press ponders: what will she do with her newfound power?

From the conclusion on the excessive spread on Italian bonds paper…

“Given the timing of the increase of sovereign yields in the countries most exposed to tensions and the concurrent, spectacular fall of sovereign yields in fiscally sounder countries, the natural and most likely candidate for the large gap between the market and model-based values of sovereign spreads is the perceived risk of a break-up of the euro area. Concerns about the fragility
of the euro are increasingly and widely mentioned by a number of market observers and have apparently caught the attention of the public at large”

A sound conclusion. Under the current terms of engagement there will remain, in the main, just one clear winner of the Euro project. That is unsustainable and the markets smell it….They’ve had their cake – they are in the act of eating it and we are approaching the point where the deficit in that equation is reaching tipping point.

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