A very interesting meeting today at which the possibility of the breakup of the Eurozone was discussed.
There are a number of factors, each rather serious, that have combined to make a crisis appear inevitible. Lack of agreement on the European Stabilisation Fund (ESF) that means it is still not operational, uncertainty even at this stage as to the size of the fund, the state of public´finances, and of European banks.
We learned that the 3 largest American banks have a combined debt equal to 35% of US GDP. The 3 largest French banks have a combined debt of 250% of GDP. France is also likely to see its triple A rating downgraded in coming weeks.
Across Europe the picture looks grim. Unemployment is rising in Belgium against a backdrop of a deficit of around 100% of GDP. Unemployment in Spain is at 22%.
No nation has ever recovered from such a crisis as Greece now faces without substantial devaluation of its currency. But Greece cannot do that, as it is in the Eurozone.
Hopes are being pinned on the issue of Eurobonds - but wait for this one - Eurobonds are illegal under German constitutional law, and so the economic driver cannot touch them. 80% of Germans now oppose Merkel's policies on supporting the Eurozone, and the Bundesbank is openly criticising the European central Bank and EU policy.
Four options appear to be open to the Eurozone. To sit back and take more of the same, fighting crisis after crisis until the money runs out. Greater political union. Exit of the weaker economies. Exit of the stronger economies. There are more cons than pros to each of these options, and it is hard to see how any of them could overcome their inherent problems.
These are interesting times, and whichever way one looks at it, it is hard to see a way forward for the Eurozone.