The euro zone sovereign debt crisis is reaching the end of the line. Spain and Italy are both simply too big to be bailed out. Yet as we speak, the yields on Spanish and Italian 10-year bonds are soaring, Spain's reaching a record 6.807%. There is absolutely no bailout package the EU can put together to get this under control now. Spain and Italy are too big to bail. But they are also too big to fail, meaning that a default would usher in a dark economic period globally, another Great Depression.
In my newsletter post at the start of the year, I made ten predictions. The last and most important one was this one:
The ECB becomes more explicit about its backstops: As I write this, Italian interest rates are now edging over 7%. The question, especially when the Italians have to roll...
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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.