August is a dangerous time, 1914 and 1939 are not propitious either.
And now we have the end game of the euro-crisis, at last, because wow have the politicians managed to string this out and waste billions, maybe even trillions of euro's in the process.
With Germany backing out of its agreement to bail-out Spanish banks, the price of their 10yr bonds has collapsed to well beyond crisis levels.
At 7.5% to borrow, the Spanish are not going to ever balance their budget. No Country could at that level for the kinds of amounts Spain needs. Add that to 24% unemployment and its time for something serious to be done. Time to really consider leaving the eurozone.
The only decisions really needs to be around timing and stability. Clearly, all the Spanish banks will need recapitalisation and it will be in the interests of the IMF and Eurozone to make sure this happens, also a new currency needs to be stabilised. the traditional way would be a dollar peg and that maybe something to consider - although the argument for letting the peso find its natural spot is a strong one.
What will be interesting over the next few weeks is watching Germany lose its power. From bully to co-operative as the Spain and then Greece decide to take a nuclear option - this means so much pain for Germany and top avoid the worst effects they will have to co-operate.
How all this works out in the political system of the EU is just too hard to forecast. But without Quantitative Easing from the ECB there does not seem a way back for Spain.
