Reuters
November 1, 2011
Prime Minister George Papandreou's call for a referendum on the latest Greek bailout plan has blown a potentially fatal hole in the euro zone's strategy to overcome its sovereign debt crisis.
Whether or not a plebiscite takes place, and whatever the result, Papandreou's gamble guarantees long weeks of political uncertainty just when the 17-nation currency area was desperate for a period of calm to implement remedies agreed last week.
It will make it harder, if not impossible, to restore investors' confidence in most euro zone government debt in the short term and to lure Chinese and other wealth funds to pour billions into European sovereign bonds.
That may force the European Central Bank to get more deeply involved in crisis interventions to steady bond markets, just as Italy's Mario Draghi takes the helm of an institution yearning to return to its prime mission of inflation-fighting.
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