September 2011
Europe: The eurozone is hamstrung by an appalling absence of leadership
Now over-leveraged sovereigns are the biggest default risk. Banks that have raised capital and shed some bad assets might even be OK, unless their sovereign exposures drag them down. It is the big corporates that raised equity in 2009, cut costs and retained cash that look strongest of all.
While corporates have submitted to the discipline of just-in-time production and delivery over the past two decades, Europe’s political leaders have become renowned for their always-behind-the-curve response to the sovereign debt crisis unfolding since spring 2010.
The essence of the policy response for most of that time has been to treat each episode of lenders rebuffing a sovereign or pricing it out of access to new funds as a temporary market dysfunction. Much...
