My view is that the euro zone sovereign debt crisis will end in a combination of monetisation, breakup or default. Let's review why.
Last summer, before the crisis hit Italy and Spain, I said that I expected Italy and Spain to come into the spotlight in a negative way:
My expectation is that Spain and Italy will be perceived as the new Ireland and Portugal, meaning they will now be stressed permanently – the spread to bunds will be permanently elevated at levels that are almost unsustainable for economic growth. The right way to deal with this is for the ECB (not the under-powered EFSF) to provide liquidity. Earlier, I suggested the ECB targeting the Italian-Bund spread at 200bps would be an effective way to go about this. But given the politics of the matter, that will nev...
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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.