If It’s Time to Shoot, Shoot. Don’t Talk.

Spanish Markets Pummeled Over ECB Disappointment – WSJ.com.

Super Mario should heed the wise Tuco’s advice. See what happens when tough talk is not followed by tough action. The Euro went up to $1.24 and then plunged 2.5 cents in a matter of seconds. Spanish markets tanked, and Spanish and Italian yield spreads versus Germany skyrocketed.

Central Bank action is not the solution to the Eurocrisis, but it certainly is part of the solution. Let’s say that Spain and Italy passed comprehensive economic reform legislation that included freeing their internal markets for goods and labor and budgetary cuts to entitlements. While the suspect markets took their time in assessing these programs, the ECB could step in and provide liquidity to their sovereign debt markets. Once investors were convinced that the reforms were working and the political will existed to continue the programs, they would reenter the markets for debt, and the ECB could slowly leave.

There is no panacea or silver bullet. The will to change and patience are what is required.



Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s