Wednesday, 13 July 2011


Readers not living under a rock in the past few days will have noticed that financial contagion has spread to Italy's banks, putting strain on the sovereign itself. You can follow the snafu as it unfolds here.

My Greek readers need not worry that this is somehow our fault too - apparently it is the Spaniards' fault - no, really.

I will add more to this story later today but for now I must share with you the following paper, which just landed in my inbox. The timing is perfect.

You see, the IMF have by now realised that one by one all of the PIIGS will fall, that the EU as a whole is insolvent and that the battle lines will be drawn around the UK and France. So instead of obsessing about the next bailout, a clever IMF wonk, one D. Kanda, has tried to estimate what the optimal fiscal adjustment programmes might look like for six European countries -France, Germany, the Netherlands, Italy, Ireland and the UK- given the preferences of policymakers and existing commitments. The results can be seen here, or in the tables below for short:

Coming soon to a negotiating table near you.

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