The Euro Crisis: No Plan B

摘要

European bond markets have moved into a period of relative calm. The spread between long-term Italian and German government interest rates is back down to levels last seen when Silvio Berlusconi was Italian prime minister. The spread between Spanish and German debt is higher, but not by much. Moreover, nothing in the news seems to rattle the markets significantly. The near collapse of the banking sector in Cyprus caused only a blip; the imposition of capital controls by the Cypriot government had little impact either. The small Mediterranean island country suffered huge losses (which augur even greater economic suffering to follow) and yet the threat of crisis spreading from one country to another has not materialised.