On the recovery in Europe’s periphery and loss socialization

It’s not fashionable to be optimistic about Europe. But I have been a Europe bull since last April when we moved from the front-loaded austerity paradigm to a backloaded paradigm. And beginning in June 2013, I saw the data moving in that direction. Now the data now fully support this stance. But that’s the cyclical view. What about the macro secular story? Here the story is a bit more murky as it involves loss socialization, the continuing bank - sovereign nexus, and huge government debt burdens without the central bank backstop of a sovereign currency issuer.
Right now, the story works virtuously because we have hit bottom cyclically. The bank - sovereign nexus actually works in a favourable direction now because the lower yields and higher bids for periphery government  bonds improves b...


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