Angela Merkel's acceptance on Wednesday of the need to recapitalise European banks suggests that a comprehensive solution to the eurozone banking and sovereign debt crisis is being contemplated, at least in Germany. How to implement a package decisive enough to end the crisis has long been clear and extra capital for banks is a key component. The other components are an admission that Greece is insolvent and must default, and credible measures to prevent contagion to the bond markets of remaining eurozone countries, particularly Italy and Spain, which can avoid sovereign default if effective supports are provided.
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