Private Sector Involvement Is Unlikely in Second Portuguese Bailout
With 10-year Portuguese bond yields above 14% (see Display), the market is suggesting that Portugal will soon need another bailout from its euro-area partners. While we share the market’s skepticism about the sustainability of Portugal’s public sector finances, we doubt that policymakers at this stage will seek to impose losses on private sector creditors, as [...]
read moreEurope’s Fiscal Compact: A Very Modest Step Forward
The fiscal compact that the leaders of most European Union countries agreed on last week to bring some order to the euro area was broadly in line with expectations. While it may eventually be seen as a first step towards true fiscal union, it is more like a pistol than the long-awaited big bazooka.
read moreIs the Euro Zone at the Beginning of the End of Muddling Through?
This week’s series of high-level meetings in Europe is being billed as make or break for the euro. The good news is that European politicians finally seem to realize the extreme seriousness of the current situation. But any agreement at this Friday’s summit of all 27 euro-area countries is likely to stop short of anything [...]
read moreWhere’s the Euro’s Lender of Last Resort?
Spain was back in the spotlight today, as rising bond yields suggested that investors remain unimpressed by the victory of the Popular Party in Sunday’s election. But the stress is spreading well beyond the euro area’s so-called periphery.
read moreNew Governments in Greece and Italy Could Contain Damage
As political casualties of the European sovereign-debt crisis mounted this week, it’s easy to understand why financial markets panicked. But all hope is not yet lost.
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