The Euro Zone Is A Slow-Motion Train Wreck

[koganbot]

"'The euro zone is a slow-motion train wreck,' Mr. Roubini said during a separate panel discussion."

Slow-wreck aficionados will note that this is better than a couple of months ago, when Europe was on the train-wreck fast track owing to the ECB's then-unwillingness to purchase Spanish and Italian bonds.*

Confused centipede attempts to mate with mealworm pupa


*It's not directly purchasing them now, but, according to Krugman at any rate, it's doing the functional equivalent, essentially laundering the purchases through banks.

Comments

[koganbot]

And here's Krugman today on Eurozone problems, with a real basic summary of his argument, plus graphs:

http://krugman.blogs.nytimes.com/2012/01/30/eurozone-problems

Without graphs:

(1) "the overall economic crisis is driven by private debt, not public debt"

(2) "huge swing of the private sector into financial surplus, which necessitated large public deficits to avoid a much deeper slump"

(3) "Europe... has the additional problem of a capital flow bubble from north to south induced by the euro, which has to be reversed"

(4) "The counterpart of these current account imbalances was a large divergence in relative price levels"

(5) "Implicitly, Europe is relying on 'internal devaluation' to reverse this divergence. But the reality is that this is very hard given nominal rigidity, even in Ireland, which is wrongly held up as an example of successful adjustment"

(6) "Europe has bought into the notion that fiscal irresponsibility is at the heart of the crisis, which is true only of Greece and not true of the troubled countries as a group"

(7) "even on the IMF's reckoning, none of the austerity countries is plausibly on the road to a tolerable fiscal situation"