While the world has been distracted by the saga of the US debt ceiling, the Eurozone crisis has taken another turn for the worse: Spain and Italy, the two largest PIIGS (and a telling indicator of how bad things have got is that it is now PIIGS rather than PIGS), have seen their borrowing costs blow out in a new bout of market contagion that has regional policymakers sweating in Europe's August heat.
As we've heard before, there are good reasons to distinguish both these economies from the countries that have already succumbed. Yet it's been striking just how ineffective the region's policymakers have been in stemming the crisis as, one after another, economies and metaphors have tumbled.
First, Brussels and Frankfurt tried to build a firebreak between Greece's debt problems and the rest of the region, only for the flames to engulf Ireland. Then there was supposed to be a line in the sand dividing Greece and Ireland from Portugal. But that was washed away. Now the crisis is attacking the two largest southern European economies – the two that are 'too big to fail and too big to bail'. Should they fall, they would probably take the Euro project with them.
If this is the Eurozone's last stand – and it’s starting to look like it is – let's hope that Brussels has better luck with this metaphor than it's had with the others...
Photo (of the Lion's Mound at Waterloo, Belgium) by Flickr user Ben Heine.
