| Given Berlusconi’s “dazzling unfitness for office” (to quote Bloomberg, and echo the Economist’s 1994 assessment of the man), it is not too surprising that his promised resignation initially boosted the EUR, but not for long. Both Greece and Italy are likely to have “technocrats” for Prime Minister. Once initial volatility subsides, it can be hoped that this should lead to two or three months of relative calm, and improving financial markets. |
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| But that is only if today’s panic can be brought under control. The ECB has certainly rushed to the rescue with Italian bond purchases, and taken a big step towards become a Federal Reserve Bank for the euro zone. It will be printing money to pay for these bond purchases. The EU will be divided into the inner and outer zone, and more quickly than we could have supposed until today. |
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| Supposing markets do calm down. What comes next? To make any stab at forecasting what is in store for 2012 is fraught with risk. Our starting point is that the euro crisis is not over, and will not be without the establishment of a (quasi) federal system of financial management. |