The latest from Ambrose Evans-Pritchard:
Germany has had enough. Any eurozone state that spends its way into a debt crisis or cannot adapt to a monetary union set for Northern rhythms will face “orderly” bankruptcy.
Bondholders will discover burden-sharing. Debt relief will be enforced, either by interest holidays or haircuts on the value of the bonds. Investors will pay the price for failing to grasp the mechanical and obvious point that currency unions do not eliminate risk: they switch it from exchange risk to default risk.
What were investors thinking when they bought Greek 10-year bonds at 26 basis points over Bunds in 2007, below the spread between British Columbia and Quebec?
“We must keep in mind the feelings of our people, who have a justified desire to see that private investors are also on the hook, and not just taxpayers,” said German Chancellor Angela Merkel.
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