Last year, Angela Merkel promised to show the markets who is boss. “There is a kind of battle over what power the financial markets have and how much room for policymaking the politicians have,” said the German chancellor. It was vital, she added, to assert the “primacy of politics”.
As the bond markets force Italian, Spanish and even French bonds into the danger zone, it is tempting to say that Ms Merkel and European politicians are losing their battle with the markets. But resorting to the imagery of warfare makes exactly the same dangerous mistake that the chancellor made – which is to see financial markets as a monster to be controlled.
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