The worst case scenario

Prospect Magazine

Prospect Blog

The worst case scenario


What happens if the ECB does not take on the mantle of lender of last resort?

The never-ending euro zone crisis has been described as both tedious and terrifying. But it is worth looking at the end game, what will happen if it all goes wrong. Right now, we are waiting for the European Central Bank to step in and assume its lender of last resort responsibilities. That is to say, that it boldly enters the financial markets and buys enough Greek, Italian, Spanish, Portuguese, Irish bonds to drive their yields down to affordable levels. The ECB, for some reason still scarred by the Weimar hyperinflation of 1923, is loath to bail out the profligate southern European nations and requires the political cover of believable pledges that the PIIGS will restrain their spendthrift ways before it will open up its wallet.

Let us imagine it does not believe their promises

You need to be logged in to see this part of the content. Please either subscribe or Login to access.
  1. December 16, 2011

    Ghaleb Tawfeeq

    Might as well invest in Iraqi government bonds. So far Iraq has never been affected by the recent global financial crisis, and I doubt it will if another crisis is repeated again! The Iraqi currency is getting stronger in value and a lot of foreign investors are seriously betting on Iraq as an emerging market.

  2. December 18, 2011


    What if we go one step further?

    Private individuals tend to be pretty heavily indebted as well. What if, when bank insolvencies wipe out their savings, they also default on their debts and mortgages? What does the data for that look like? Will it be more of a wash? The people actually coming out on top?

Leave a comment


Tom Streithorst

Tom Streithorst
Tom Streithorst is a cameraman and journalist 

Most Read