Thursday, September 8, 2011

The endgame

Greece is now at the point where default is an inevitability - market prices suggest 91% probability of default within 5 years, at which point the game is over. I've no idea what Schauble and the others are thinking of doing, but the threat of contagion to Italy is even more terrifying, as one observer points out: "If Italy defaults, nearly every bank in Europe would feel the impact or go bust, either because they own debt or they are counterparties to debt".

Yet we're still involved in this silly game about deficits and fiscal targets. That way lies madness. Money has to be brought under political control here, or the whole financial system will collapse. Moreover, that political control cannot be the creditor nations bossing the others around - they're are as much to blame as anyone else.