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November 30, 2011
'How can Europe possibly save itself?'
So asks Megan McArdle at The Atlantic: I remain skeptical, in the end, that Germany is going to agree to substantially deeper fiscal integration with Greece and Italy. You hear a lot of people saying that "We know what will work" and lamenting the fact that policymakers won't do it, but if the last four years should have taught us anything, it's that we don't actually know that anything will work. Don't get me wrong--I think that either an ECB intervention or a eurobond are the only things that are likely to work. But I can also see scenarios where they don't, or where they work for only a short period of time. The current plan on the table, as I understand it, is for the PIIGS to get bailouts in exchange for letting the more solvent countries step in and run their budgets if they violate budget rules. I can see how this could work, but I can also see how that might be the last straw, and that if the central countries actually tried to execute on this authority, they might find...(Read Full Post)