So now it is official, Berlusconi is out. End game scenarios have gained a quiet acceptance in Germany and France, but Brussels and the eurocrats are having none of that – at least not yet. Their time will come later. The biggest obstacles to a crisis solution have been the adherence of ECB to its now hopelessly irrelevant mandate and the holy cows of “no defaults”, “no competitive devaluations or exits from EZ”.
I believe we will see all of them very soon – maybe already this year, but definitely latest early next year (only because of can-kicking and good old SMP by ECB coupled with the approaching holiday season and thinner markets). The talk on euro bonds, EFSF expansion etc. has died down, and hopefully the Great Leaders realize this and stop developing pre-agreed constructions that do not serve their original purpose anymore. Somebody should teach the eurocrats the idea of sunk costs.
Instead of backstopping the crisis, the only thing the ECB has been doing is peeing in the pants in the winter to keep warm – or perhaps even worse. With a less dim fellow leading the ECB and the rot spreading to the core, the odds of at least a partial, albeit temporary solution, is increasing.
