Financial Times
May 31, 2012
Imagine – if you possibly can – that the eurozone crisis is finally resolved. The dust has settled. The euro is still in one piece. How would we have got there?
A lasting solution will require a shift in belief. Belief, in turn, can be measured through bond spreads and, in particular, the level of German yields.
Many investors now expect – and more than a handful of policy makers now fear – that the end is nigh, that the euro is on its last legs. As that belief festers, its self-fulfilling qualities threaten the euro’s survival.
The consequences of that belief are all around us. Slow motion bank runs, widening sovereign spreads and biting recession are symptoms of an underlying fear that the euro will crumble.
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