A fatal recession?

Economist
November 7, 2011

There is a lot to keep track of in Europe these days (Charlemagne is a great resource for this, by the way), but here is a brief digest. First, George Papandreou's gambit to get the opposition behind efforts to implement necessary reforms seems to have been a success. Greece will get a new, transitional unity government to put the plan in place, though Mr Papandreou will not be leading it. This is good news for the euro zone, on the whole, as it implies that there is not yet a viable political force for departure from the euro within Greece. The medium-term political outlook for the country is highly uncertain, however.

Remarkably, the Greek dynamic has become a sideshow, with Italy commanding the main stage. A flood of rumours developed over the weekend to the effect that Silvio Berlusconi was preparing to resign. Mr Berlusconi is now denying this, with predictably nasty consequences for Italian bond yields. The European Central Bank is probably in the market aiming to keep things from getting out of hand, but one has to suspect that the central bank doesn't want to do anything to deter Mr Berlusconi from leaving.

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