Saturday, November 19, 2011

Why E.U. collapse is more likely than the fall of the euro

Some doubt that German taxpayers will be as ready to pay doles to Lesbos and Livorno as they were to pay doles to Leipzig. But if the alternative is a breakup of the euro zone, they will do it. Chancellor Angela Merkel made that clear Monday when she urged her Christian Democrats to accept “not less Europe but more. . . . That means creating a Europe that ensures that the euro has a future. Our responsibility no longer stops at our countries’ borders.”

Those betting on a euro breakup believe that the inflation-phobic Germans will never permit large-scale bond purchases by the European Central Bank — the policy known in the United States as quantitative easing. But this needs to happen to bail out not only the Mediterranean governments but also insolvent banks — including German banks — throughout the euro zone.
Click here to see the whole article by Niall Ferguson

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