Over the past week, it has become clear that a third annual conflagration throughout Europe is upon us. The crisis has morphed yet again, and like The Hydra, it has come back in a more menacing form. The issue this summer is more profound than the “sovereign debt crisis” which struck last summer. Last summer’s issues were always containable with simple resolve from the ECB. The market forced the issue in sudden manner and eventually a fix came in the form of 3-year long-term refinancing operations (LTRO). Astute observers will notice that today, sovereign debt rates, while higher, have not flared up to the levels they reached last year. European interest rates should not approach summer levels because there is a set playbook that works to contain sovereign rates as soon as the ECB feels the sufficient amount of urgency to spring into action. Over the past 6-months, fiscal austerity has been implemented across much of Europe and it simply hasn’t shown any evidence of success. Closing budget deficit gaps and paying down debt is a solution that works quickly when growth is high and works over a stretched out period when growth is slow or even flat. If growth […]
Over the past week, it has become clear that a third annual conflagration throughout Europe is upon us. The crisis has morphed yet again, and like The Hydra, it has come back in a more menacing form. The issue this summer is more profound than the “sovereign debt crisis” which struck last summer. Last summer’s issues were always containable with simple resolve from the ECB. The market forced the issue in sudden manner and eventually a fix came in the form of 3-year long-term refinancing operations (LTRO). Astute observers will notice that today, sovereign debt rates, while higher, have not flared up to the levels they reached last year. European interest rates should not approach summer levels because there is a set playbook that works to contain sovereign rates as soon as the ECB feels the sufficient amount of urgency to spring into action. Over the past 6-months, fiscal austerity has been implemented across much of Europe and it simply hasn’t shown any evidence of success. Closing budget deficit gaps and paying down debt is a solution that works quickly when growth is high and works over a stretched out period when growth is slow or even flat. If growth […]