An Impeccable Disaster
By PAUL KRUGMAN
Published: September 11, 2011
On Thursday Jean-Claude Trichet, the president of the European Central Bank or E.C.B. — Europe’s equivalent to Ben Bernanke — lost his sang-froid. In response to a question about whether the E.C.B. is becoming a “bad bank” thanks to its purchases of troubled nations’ debt, Mr. Trichet, his voice rising, insisted that his institution has performed “impeccably, impeccably!” as a guardian of price stability.
Indeed it has. And that’s why the euro is now at risk of collapse.
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My comment...
Paul Krugman sees the equivalent of bank runs in Spain and Italy as investors, fearing sovereign debt defaults, demand higher interest rates to hold Spanish & Italian government bonds. "We're not talking about a crisis that will unfold over a year or two; this thing could come apart in a matter of days. And if it does, the whole world will suffer."
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