Economist Weinberg: Time to 'Throw in the Towel' on Eurozone

Tuesday, 10 Jul 2012 11:50 AM

By Nancy Stanley

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EU leaders have failed to protect Italy from losing access to funding markets, according to Carl Weinberg, founder of global economic analysis firm High Frequency Economics, CNBC reported.

EU governments have “failed to stabilize every challenge they have been given so far in the crisis,” he wrote.

Seen as too big to bail out, EU leaders in June agreed on short-term steps to shore up their monetary union and lower the borrowing costs of Spain and Italy, Reuters reported.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

European finance ministers are meeting in Brussels this week to detail plans from the EU summit, which gave the European Central Bank greater oversight of the region’s banks and use of the eurozone’s rescue funds to lower countries’ borrowing costs.

However, borrowing costs in Spain and Italy have recently moved toward unsustainable levels as the hopes raised by the summit begin to fade, according to Reuters.

The yields of the 10-year Italian bond rose to 6.11 percent on Monday. The economic fate of Italy, the eurozone’s third-largest economy, is now in the grasp of speculators, Weinberg noted, according to CNBC.

“This is severely disappointing for a zone whose aggregate finances are not in bad shape at all,” Weinberg said, adding that the problem is the inability “to redistribute financial resources and fiscal acumen” among the nations.

The political status quo will never allow for a long-term solution to the European crisis, he stated, noting that banks across the region remain in big trouble.

“All the banks in Greece, pretty much, are insolvent,” he said.

“Italy’s banks have problems too as Monti dei Paschi di Sienna’s call for help last week demonstrated. Italian banks are next to come under the gun. Yet Euroland funds to support Italy have yet to be raised,” Weinberg stated.

“We are ready to throw in the towel. No one can believe that no bank in Euroland will fail,” he said.

“What Euroland needs is a king to knock together heads of all the princes of all the provinces, or rather nation states, to do the right thing for the kingdom. No King is apparent, so no hope of an orderly end to this mess is likely," Weinberg stated.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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