Bloomberg
December 8, 2011
The never-ending comedy that is Europe’s sovereign-debt crisis has reached its Otter moment. That’s when the world realizes the fundamental principle guiding every important government decision is this: “I think that this situation absolutely requires a really futile and stupid gesture be done on somebody’s part!”
The quote comes from the 1978 movie Animal House. After the dean of the fictitious college tells the Delta House boys that he’s expelling them all, the fraternity’s smooth-talking rush chairman, Eric “Otter” Stratton, delivers those famed words of inspiration to his downtrodden brethren. Bluto, the drunk with a 0.0 grade-point average played by John Belushi, says: “We’re just the guys to do it.” Mayhem ensues.
Europe is imitating art. We keep getting futile gestures from its political leaders in response to the euro area’s debt troubles. It matters little what form these take, as long as they placate the markets until the next ad-hoc plan can be floated. One day it’s “firewalls,” whatever those are. The next it’s “bazookas.” Now it’s German domination of European political and economic life. There are too many proposals flying around to keep track.
Here’s the amazing part. The gestures often work. Just like that, the debt crisis seems to be in remission, if only for a few days. Last month the annual yield on Italy’s 10-year bonds soared past 7 percent, the same tripwire that spelled doom for Greece, Ireland and Portugal. This week it fell below 6 percent. Spain’s 10-year bonds now yield less than 5.4 percent, down from 6.6 percent last week.
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