Another bad day....
Yields on government bonds are rising across the Eurozone. With each basis point increase, Europe's access to the bond market is slowly drying up. The policy options are closing up. Soon, the choice for Europe's over-indebted countries will be binary; austerity or default.
Before you ask, dismantling the Euro is not an option. The pain that may emerge from default or reducing the fiscal deficit will be seem mild compared to the chaos and collapse that will follow the demise of the single currency. The Euro may have been a disastrous project, but that discussion ceased to be meaningful over a decade ago. If the Euro falls, the economies of Europe will be wiped out. There might yet be a day for dismantling the single currency but it resides in the distant future.
The preferred option has to be austerity. It will provide governments will some limited ability to determine the timing and distribution of pain. A default will unleash another round of banking failures and sharp reductions in output. The consequences will be pernicious and arbitrary.
Austerity will also teach Europe a long overdue lesson; excessive government borrowing stores up trouble for the future. Sooner or later, there will be a reckoning. After thirty years of excess, that moment has come.