Wednesday, September 5, 2012

"Eurozone Begins to Fracture"

Walter Russel Mead suggests that the Eurozone is beginning to fracture, not necessarily because of the big news items, but because of increasing disparity of interest rates among its members. He writes:
Business and consumers in prosperous Germany have extremely low interest rates and can borrow freely. Companies in snake-bit countries like Italy and Greece face very high interest rates, even if their own business is sound and their prospects are good.

This is a destructive situation. If it lasts, Europe will be forced to dismantle the currency union, because no economies can survive under these conditions.
He notes that this gives a German company a competitive edge  over a business in Italy or Greece. (H/t Instapundit).

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