Monday, September 26, 2011

Merkel's muddled mindset.

The German Chancellor went on  TV for an hour yesterday and provided zero coherence on the ever growing crisis within the Euro Zone. The report of the interview from Deutsche Welle is linked here, and the following are my chosen quotes indicating the mess that seems to be the Merkel mind:

allowing Greece to default on its debt could trigger a domino effect within the eurozone that would destroy investor confidence in the currency union....

...she would not rule out the possibility that one could manage "the insolvency of a state just like a bank" once the eurozone implements its permanent bailout fund, the European Stability Mechanism, in 2013.

Clearly the EU will be better placed to fight off further insolvencies once the ESM (in the unlikely event it is ever ratified) is in place, but eighteen months ago Merkel and Sarkozy wrongly thought that a combination of the EFSF and the EFSM would be sufficient to fight off a Greek default, later also believing the same could apply for Ireland, Portugal and the second Greek bailout!

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