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Where Are The Responsible Adults In Europe?

The political difficulties in Europe overshadow economics, and those difficulties are entirely political. This limits the usefulness of purely economic models for forecasting near-term trends. My instinct is that the verbal fighting between Greece and other European politicians and institutions reflect partisan animosities, which complicates the situation. However, I lean to a hope that Greece will not exit the euro, rather we will have a "muddling through" scenario where domestic reforms continue, but are changed to be less destructive for the economy.

The difficulty that I have in writing about the euro area is that the fate of the euro is entirely political. My background is in fixed income and macro, with an emphasis on mathematical modelling. My usual assumption is that policy makers will do their best to avoid policy errors, at least within the context of their analytical world view. Unfortunately, euro area policymakers are advocating highly damaging… Read More …

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