Cover of MoneyWeek magazine issue no 553

House of cards

2 September 2011 / Issue 553

The next stage of the eurozone crisis


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Europe’s debt: a ‘three-pipe’ problem

In our cover story, James Ferguson quotes Sir Arthur Conan Doyle’s character Sherlock Holmes: “Once you eliminate the impossible, what is left, however improbable, must be the truth”. It is a thought being picked up by European politicians too.

Where does it lead James? You’ll have to read the piece to find out. But after eliminating the impossibles he concludes that the only way out of the debt crisis for the eurozone is to start issuing Eurobonds. But if everyone can issue bonds backed by all nations, how might it be possible to stop the likes of Greece from abusing the system – issuing more bonds than they have a hope of supporting and causing yet another debt crisis along the way? James says it could work if we put in place a “robust set of rules” to keep things under control.

He might be right in the short term (and it is not as if there is another option). But it is still hard to see how Eurobonds could save the currency union in the longer term. I asked When Money Dies author Adam Fergusson (who used to be an MEP back when a common currency seemed the obvious solution to everything) about it this week. He isn’t so sure: he can’t see how any rule can be made so robust that Greece can’t ignore it. That the eurozone leaders will introduce a Eurobond is improbable but possible. That it will work beyond the short term? Impossible.

• Read the full editor’s letter here: Europe’s debt: a ‘three-pipe’ problem.