πιο κοντά στην καταστροφή

MIKE WHITNEY
Disaster in the Eurozone

How close are we to disaster?

MT–We are getting closer to a disaster because of lack of political solution relating to the ongoing Greek crisis, and the contagion effect we are seeing building up in the peripherals but, mostly beacause Europe lacks a similar US TLGP program. So, because this mechanism is absent in the European space, continuous funding pressures, mean that banks, such as BNP Paribas and Societe Generale will be selling some assets to built capital cushions as you mentioned in your question 4. On top of that, you have a few major elections coming up in Europe (Spain in November, France presidential election in May next year, etc.), which are slowing down even more critical decision making.

MW–There are a lot of very smart people trying to figure out how the eurozone can get through this mess, but I don’t see how. The political obstacles appear to be insurmountable. What do you think will happen; will the eurozone muddle through this mess or is this the “end of the line”?

MT–It is not going to be a smooth ride for sure. I do not think it is the end of the line, end of the day if Germany decides to leave the euro they have too much to lose. They have been very big beneficiaries of the euro zone so far, although in Europe we are clearly staring at the abyss. The ball is in the political camp, but, given the politicial agendas showing up with upcoming elections, there is potential for the situation to turn nasty.

What markets hate most are uncertainties, we are going through a period of lasting volatility and heightened tensions. It did not have to be that way in the first place, but the can kicking game in Europe has been decisively played to maximum effect, for too long. Unfortunately for European politicians, it is decision time, make or break, and we can only watch and hope for a good outcome from the sidelines.