Sunday, January 22, 2006

Who Will Be The First To Blink?

Methinks the first serious test of the eurosystem is now looming on the horizon. The title of this post refers to an earlier point made by Nouriel Roubini. The FT this morning is reporting that:

"The German cabinet will on Wednesday endorse a 2006 budget that breaks the European Union's fiscal rules for the fifth year in a row, amid criticism that Angela Merkel’s coalition government is failing to meet its own target to cut spending."

If this is confirmed the EU Commission and the ECB will then have to respond. One of these fine days all hell is going to break loose in the financial markets. Will that be sooner or later? We await developments.

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