European Union Expansion by 2030

[Beet]

I don't see any limit to the contagion once it gets started. Greece's default will spread to Ireland and Portugal's yields, and these will spread to Spain, and these will spread to Italy, and these will spread to France and Belgium, both of whose yields widened late last year. Sovereign debt contagion will spread until the point where there is demonstrated political will to make sovereign debt whole.

The ECB could depreciate the euro and use the proceeds to buy government bonds of afflicted countries. The German economy would be overstimulated by a cheaper euro, to avoid putting the entire currency union at risk by having something like Spain, for instance, be forced out. However the people in charge of Europe's institutions are ultra orthodox in their outlook and this kind of talk is heresy.