The euro crisis: Far from over

Posted: February 26, 2013 in economy
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PAUL KRUGMAN quips:This is the way the euro ends: not with the banks but with bunga-bunga.As he says, the market gyrations spurred by Italy’s discomfiting election are not a sign of the single currency’s imminent demise, but they are a clear warning that Europe’s crisis is anything but over. There are quite simply too many ways for things to go wrong and so few ways for things to go right. An exit from recession remains elusive—unsurprisingly, given the continent wide commitment to budget cuts and too-tight monetary policy. And recession is exerting consistent and intense pressure on governments across many different countries. For the crisis to remain in check, political systems in every country must withstand that pressure. Because when they don’t, there are spillover effects; Italy’s mess is generating a rise in Spanish bond yields.Today’s market jitters are the creaks and groans of a shaky euro-zone infrastructure straining under the heavy weight of macroeconomic weakness. Ideally, Europe’s leaders would work to shore up that infrastructure and lesson the economic load. Instead, they seem determined to make us all wait and watch, to see if the flimsy structure will stand or collapse. Maybe it will stand. But it only takes the failure of one little strut to bring the whole thing down. And there are so many little struts.

via Economic Crisis


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