After spending a week in Europe talking to scores of investors, it’s obvious that the Greek crisis has reached an inflection point. I’m convinced that the most likely resolution is one that, in the eyes of Germany, solved the most issues for the lowest cost. That is why I think the issuance of euro bonds is the high probability outcome.
Think about it: Germany found a way to artificially depreciate its currency by joining the eurozone, which made it more competitive in global trade.
Now the music’s stopped. With no solvent trading partners left in Europe, it’s likely that the breakup of the eurozone—or the departure of Greece, along with the second-order risks of other countries leaving—is more expensive than simply bundling up everyone’s balance sheets and issuing euro bonds.