In the early days of the sovereign debt crisis, the thinking was that bailouts, if necessary, would be punitive to keep other nations from following suit.
Now, bailouts have become institutionalized, part of the European landscape. Terms are longer and easier to manage. Pretty soon, there will be no stigma to being bailed out by the EU and IMF at all. What stigma will there be to being the fourth bailout recipient, especially if you can spread the pain of repayment over ten years (or more, quite likely, if that becomes too onerous…)
Whatever hope the market may have had of the euro being a deutsche mark substitute was shattered over the weekend when Europe put in place a permanent bailout mechanism, rescheduled the Greek bailout package and added Ireland to the dole.
The euro will continue to exist but it will not be considered hard money in the future. It is instead every German’s nightmare…
RIP the Germanic Euro: 1999-2010.
