Eurozone Defense


Is there an actual crisis of the euro? Ever since the Greek government’s surprise upward revision of its budget deficit to 12.7 percent of GDP last winter, the focus has been on Greece’s ability to service its Olympian debt. Of chief concern was the rollover of $25 billion euros worth of Greek bonds coming due this spring. The yield on Greek sovereign credit default swaps shot up; by April, Greece had rolled over $15 billion worth of its paper at successively higher and higher rates of interest, until the costs became prohibitive. European finance ministers were thrust into the role of lenders of last resort. The perennially indecisive character of European politics, which makes it nearly impossible for European policymakers to hold one another to account, allowed the Greek situation to get out of hand. For months it seemed the most that European leaders could manage was a muddle of bluffs, half-measures, and mixed-messages. Upcoming regional elections had the Germans dithering at the rank unfairness of paying for the Greeks to retire at 55 when they retire at 67. And before long, what had begun as a bad debt problem in Greece had degenerated into a broad liquidity crisis for the Eurozone.

more from Jule Treneer at n+1 here.