The big news today is that Germany is furiously backtracking.Yesterday Angela Merkel was quoted as saying European sovereign bondholders must take haircuts. Today they’re saying that was a huge misunderstanding.
This is not surprising: It was the same deal in May during the Greek crisis. Merkel’s rhetoric was all over the map, and then of course she eventually caved, but not after creating much more uncertainty than was ultimately necessary.
Bottom line: It’s one thing to oppose bailouts. It’s another thing to talk about opposing bailouts, but then caving in the end.