The political economy of the euro crisis, part 2

This is a continuation of my thoughts from two weeks ago on Europe. Rather than continue using the new Credit Writedowns Post Framework, I want to to use the news flow to bring this one together.

I have a slew of European articles for the links that I will use here instead to tie together the overarching themes dominating the European landscape. The dominant theme is that the economy of Europe is in tatters and this is causing a re-think of the policy course. In my view, the political space for the re-think is limited and will ultimately entail some tacked-on growth policies and relaxed deficit target timetables. However, the prevailing economic paradigm will remain the same, fiscal consolidation to prevent sovereign default.
As fiscal consolidation is a deflationary policy, I expec...


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