In a normal year predicting economics is like predicting the outcome of a card game: there are too many variables and the only certainty being that the suckers will lose and the stealthily self-interested will win. In 2012 however, the shape of the crisis is heavily predetermined: there are a series of crucial stages the eurocrisis has to go through and the way they're resolved will affect everything else. Starting from where we are now, there are three big questions:
- Is the ECB's unofficial money printing operation - a massively expanded bond-buying venture combined with unlimited provision of cash by global central banks - going to be enough to prevent a second credit crunch, centred on Italy?
- Does Greece spiral finally into default, social crisis and chaos, raising the prospect of the near-dictatorial economic policies needed if you have to exit the Euro?
- Do the French banks take so many losses on the sovereign debt of southern Europe that they have to be part nationalised, thus removing the country's AAA credit rating and the all-important financial parity between Germany and France that lies at the heart of the European system?
Right now my answers to these questions would be yes, yes and yes. [e continua ...]