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Two Models for Europe

MUNICH – Interest rates for public debt within the eurozone have spread once again, just as they did before the introduction of the euro. Balance-of-payment disparities are steadily increasing. The sovereign-debt crisis is eating its way from the periphery to the core, and the exodus of capital is accelerating. Since the summer, €300 billion, in net terms, may well have fled from Italy and France.

The printing presses at the Banque de France and the Banca d’Italia are working overtime to make up for the outflow of money. But this only furthers the exodus, because creating more money prevents interest rates from rising to a point at which capital would find it attractive to stay.