A new financial crisis is brewing in Europe, one that will prove as devastating as the last economic crisis. This one will also be centered in southern Europe--only this time, instead of the sovereign debt of the region's governments, it will involve the commercial banking sector.
Most of the new loans will go to paying off Greece's debts.
For the past two weeks Greece has entered the climax of the Comedy of Errors - that is its six-year-old economic crisis. Banks have closed, referendums called, rallies and counter-rallies have been held, society divided and tales of conspiracies and Armageddon have become commonplace.
Today we stand on the precipice of a European implosion. A popular referendum on July 5th may determine if Greece will leave the monetary union, and perhaps, according to its Central Bank, also the EU.
It now falls to Europe's politicians to act resolutely to stop the union drifting apart. Their present approach of endless negotiations and compromise formulas risks losing the last vestige of popular support.
Unless the political and economic integration catches up, a sufficiently big crisis will inevitably rip up the Euro zone.
Third Thing: The Swiss National Bank on Thursday threw a boulder to the drowning euro by giving up on trying to keep its
"The euro is to blame for everything. Without it, there would be no need for budgetary rigor and growth would return." This is surely the most absurd argument to arise from the nationalist and populist parties campaigning for the European Parliament elections.
What distinguishes the two halves of Europe, argues political scientist Francis Fukuyama, is the presence, in the North, of a "political coalition protecting the autonomy of the bureaucracy." Here civil service is largely perceived as impartial and entrusted with providing continuity to policymaking. Governance failures in Southern Europe, on the other hand, are inextricably tied to more or less pervasive forms of clientelism, which buries merit and frustrates reforms.