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Reversing Europe’s Renationalization

NEW YORK – Far from abating, the euro crisis has taken a turn for the worse in recent months. The European Central Bank managed to relieve an incipient credit crunch through its long-term refinancing operation (LTRO), which lent over a trillion euros to eurozone banks at one percent. This brought considerable relief to financial markets, and the resulting rally obscured underlying deterioration; but that is unlikely to last much longer.

The fundamental problems have not been resolved; indeed, the gap between creditor and debtor countries continues to widen. The crisis has entered what may be a less volatile but potentially more lethal phase.