A story of hope somehow defying logic

by John Authers

Financial Times
May 19, 2012

Courage is being scared to death ... and saddling up anyway.
John Wayne

Hope springs eternal. And true courage means acting when you are sore afraid. These are clichés, for which I apologise, but they remain true, and relevant to today’s difficult investment situation.

The story of the eurozone sovereign credit crisis, like the US subprime credit crisis before it, is of hope perpetually beating out rationality and logic. A Greek exit from the euro has been an obvious possibility for at least two years. It has been much discussed.

Politicians and bankers from core European countries have for months hinted that a Greek exit might even be a good thing. Some analysts said it might even help the euro by removing the eurozone’s weakest link. All now looks like denial, or complacency.

Beyond that, economic logic overwhelmingly suggests that far more must be done to reform the eurozone’s structure than politicians have so far agreed if there is to be any chance of saving the euro. This is no secret, and has been widely debated.

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