Willem Buiter: Time is running out for Europe17 November, 2011, 13:24. Posted by Zarathustra
Tags: Economy, Euro Crisis, Europe
Willem Buiter of Citigroup was on Bloomberg TV, and he raised some few good points.
Time is running out for the Eurozone. While ECB CAN help, ECB is not really helping as ECB is an “heir of the Bundesbank”, thus they are rejecting the “lender of last resort” role of a proper central bank. There could be a material risk of default of Spain and Italy, and that could be a financial catastrophe. He thinks the EFSF should be increased to 3 trillion, but that’s not going to happen for political reasons. So the only show left is the ECB, and if the ECB doesn’t act, “that‘s the end of eurozone”.
On Italy, the current situation is challenging already. 7-ish percent of 10-year yield is not sustainable. Although the they can live with it for a while, in the long-run yield has to go back to 4-ish, and the only way to do it is to get ECB to act.
There’s also some good points on why triggering CDS on Greece default is better than trying to disguise PSI as if it were not a credit event.
Watch the whole thing here: