Ecofin, Strauss-Kahn's absence and Europe's Debt Crisis.

There is a first rate interview in FXStreet.Com, linked here, with Yanis Varoufakis, professor at the University of Athens, where the following answers to the interviewer's questions strike me as significant in relation to this week's Ecofin meeting and the distraction of key player Strauss-Kahn (see my posting immediately beneath this):

What would be the direct implications of a Greek debt restructuring for the PIIGS?

It depends on all the other measures that accompany such a restructure. In the absence of structural reform of the eurozone's architecture, a debt restructure, on its own, will be as inevitable as it is potentially destabilizing in the context of the banking sector crisis that is unfolding in parallel to the debt crisis.

Who in the periphery is next in line, and what would it take for markets to turn against them?

All it will take for the contagion to spread its ugly wings in (A) a Europe committed to the currenct policy mix and (B) time. As for the identity of the next domino piece, all eyes are, of course, on Spain. But the epidemic may surprise us by hitting another target instead. France beware!

Will another round of aid by the EU/IMF effectively help to calm fears of default?

Not in the slightest. Lending at high interest rates to the insolvent simply delays default but makes it more certain than ever (and more destructive when it happens).

In a situation such as that deliberately created in the world today, where national leaders have been rendered powerless by fuzzy yet interconnected Treaty obligations, powerful and unaccountable individuals control huge wealth far beyond any possibility of controls or accountability, where the line between the legal and illegal has been deliberately blurred in the name of expediency, we seem set for an interesting week.

Strauss-Kahn was to have been meeting with German Chancellor Angel Merkel this very morning!