This Goofy Diagram Does A Remarkably Good Job Explaining What's Happening In The Eurozone

In a note authored Astrid Schilo of Exane BNP Paribas on the politics and disfunction of the Eurozone, this drawing is shown to describe the current situation.

europe diagram

Photo: Exane BNP Paribas

This is really the story of the year in a nutshell.

The ECB has done an extoardinary amount of work in 2012 establishing itself as a real monetary authority that has the power to backstop the entire financial system (as exists in England, the US, and Japan). And that is super-powerful in and of itself (and it’s why Mario Draghi should be Person Of The Year).

But other than the ECB — which has the benefit of being undemocratic — the rest of the project remains a mess. There’s no political union, fiscal union, banking union, or common Eurozone budget, all of which need to exist for the project to actually work sustainably.

It’s a huge deal that the sovereign debt part of the crisis came to an end (for the most part) in 2012. But there’s massive heavy lifting yet to come.

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