Sea of Troubles

➞ Krugman on the Euro

Paul Krugman’s five step scenario for the failure of the Euro enjoys face validity:

4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:

4b. End of the euro.