CDOs to save the Eurozone?
Wolfgang Munchau sees danger with Europe's chosen relief mechanism:
There exist only two categories of solutions to the crisis: a fiscal solution or a monetary one. Politics blocks the first, European law blocks the latter. The CDO is an alluring idea from the perspective of a technocrat who has to come up with something that satisfies current political preferences and that respects perceived or actual legal constraints. On the surface, it appears as if a CDO was a third category in itself. But that is not the case because it ultimately dumps the burden on the ECB, just as the subprime mortgage CDOs became a liability for governments.As I have argued previously, European laws and current political preference are inconsistent with the survival of the eurozone. Something will have to give.
