Squaring the Euro Circle

Rehashing some numbers from the Economist (p. 81 November 26th 2011) illustrates the scale of the imbalance poisoning the heart of the Eurozone.

The net foreign liabilities - what business, households & governments owe to foreigners less the foreign assets they own - of Greece, Ireland, Portugal and Spain are close to 100% of their respective GDP's.

Yeap - that's in all all four cases - not cumulatively.

And to quote the Economist: 'Much of their debt is being financed by local bank borrowing or bonds (issued) in creditor countries - such as Germany.'

Now it's no secret that the so-called 'core' of Europe's banks have lent heavily to finance the 'extravagance' of the so-called 'periphery' - but think about this.

As an Irishman I understand the burden that the EU/ECB's brutal refusal - unfortunately reinforced by the farcical Greek misadventure - to contemplate an orderly restructuring (default) of privately owned debt has placed on my countries finances.

Of course it may be a necessary evil - to save the sovereign you must first save their banks? - but lets not pretend that economic consequences are not very disproportionate.

I doubt this circle can hold.