Italy: The Bomb That Could Blow Up Europe
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  • Jim.

    So does Krugman still think Bond Market Vigilantes are “mythical”?

  • Jim, yes, the vigilantes are completely mythical in the case of the United States and other countries that are able to issue their own currency. You would know that is what Krugman meant if you actually read him.

    What is catastrophic is the idea that what Italy needs is immediate labor market reform. Perhaps such reforms would be useful, but they have nothing to do with the present catastrophe. This blog should know better. The bloggers need to do their homework, or else it will be relegated to a home for old trolls. Which would be a pity because WRM clearly has a lot to contribute in long-term analysis.

  • Snorri Godhi

    “Italy is simply too big to rescue […]”

    “Monti’s last hope is to get enough support from Germany to stop the speculative attacks against Italy.”

    Dr. Mead, are there any limits to your tolerance of cognitive dissonance?

    Or do you have in mind some sort of “support” from Germany that does not amount to a “rescue”? if so, please be more specific.

  • Kris

    “Italy—like much of the continent—will go into a month-long hiatus”

    I’m not sure whether this is typical irresponsibility or good news.

    “Monti is having a tougher time than many expected”

    I will bite my tongue rather than insult “many”.

  • Read a very interesting theory today: The ONLY way to save the euro is for Germany to leave. This would allow the rest of the countries to devalue their currencies, get out from under un-payable debt, and begin to restructure their nations, banking systems and lives….

    Something to think about…

  • Alex, there are some other countries that could (and probably would and should) leave with Germany in that scenario – Austria, Finland and Holland, for starters, would have no business in a super-weak southern currency. They could have a union of their own – the Neuro-Seuro solution. But since the point of European integration is basically to yolk Germany to France, it’s a non-starter politically.

    The Germans could in theory cave and allow the ECB to monetize the South’s debts, but I don’t think there’s any way the German electorate would be willing to stand for the ensuing inflation.

    The Euro’s cooked.

  • Eurydice

    And Berlusconi is waiting in the wings with his pro-lira platform. Under the lira, Italy managed just fine with its high public debt, high private savings, revolving-door governments and solid, unchanging bureaucracy.

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