Europe is a doom-monger’s paradise at the moment. Riots in Greece; summary Cabinet reshuffles; meetings between Merkel and Sarkozy to save the single currency — and there’s still the potential for things to get worse, much worse. If the Greek government defaults on its debts, then there’s no knowing where the contagion will spread, only that it it will spread wide: from Spain and Portugal to markets across the world. Share indices have already been trembling at the prospect, although many of them rallied slightly today.
One consolation, however scant, is that all this crystallises just what can happen to governments who operate beyond their means. Indeed, this seems to be the point that Jean-Claude Trichet, the President of the European Central Bank, makes in an interview with the Times (£) today. As he puts it, “We were not at ease with the idea that, in the heat of the crisis, all countries were called to spend as much as possible, embark on deficits as much as possible.”
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