Crisis update

Tom McDonnell: FT Alphaville is reporting that Moody's is now talking about multiple defaults and a Eurozone break-up. See here for the Moody's press statement while the Guardian is reporting on the widespread market rumours of an impending IMF bailout of Italy. The success or failure of the Belgian, French, Italian and Spanish bond auctions this week should give us a clearer picture.


Wolfgang Munchau has taken a fevered turn and is talking about the Euro zone in terms of days to avoid collapse here. He does point out that technical solutions still exist. These solutions involve the introduction of Eurobonds, the ECB as ultimate lender for sovereigns, and the creation of a Eurozone treasury with oversight over fiscal policy.

Meanwhile Paul Krugman is having difficulty finding a plausible scenario under which the Euro survives.

Gawyn Davies looks at breakup scenarios here.

The EU Summit on December 9 may be the most important yet. This WSJ article provides clues as to the likely strategy from Germany and France. According to the IT Germany is considering elite 'AAA' bonds to be issued jointly with France, Finland, Netherlands, Luxembourg and Austria. Presumably this is predicated on France making it through the year as a AAA country.

One positive development is the increased pressure the ECB is coming under from national Governments to step up its bond buying.

Posted in: Europe • Europe

Tagged with: Eurobonds • Euro crisis

Dr Tom McDonnell

Tom McDonnell is senior economist at the NERI and is responsible for among other things, NERI's analysis of the Republic of Ireland economy including risks, trends and forecasts. He specialises in economic growth theory, the economics of innovation, the Irish and European economies, and fiscal policy. He previously worked as an economist at TASC and before that was a lecturer in economics at NUI Galway and at DCU. He has also taught at Maynooth University.

Tom obtained his PhD in economics from NUI Galway.