Friday, July 22, 2011
The wonderful graphic above comes from Calculated Risk.
The point I wanted to add is this: every bailout announcement has caused some kind of drop in the spreads, only to see them resume their growth afterwards. Yesterday's plan has caused a smaller drop in the spreads than any previous bailout. That suggests to me that spreads will resume growing again shortly, and that the speed of the crisis will begin to accelerate. The plan announced yesterday lacks all credibility as a general response to the problems (see, for example, Megan McArdle's critique).
I am shifting my view on this situation. It now seems to me that it's really about the political leadership of the Eurozone and the fact that Europe lacks the institutional capability to understand what it is up against, and respond decisively and effectively. It's going to get much worse, until the Eurozone falls apart altogether, or Europeans finally get desperate enough to do something that's really going to work.