by Marc Chandler
The conventional narrative has it backward. It worries about the threats to stability emanating from the periphery of Europe. Policymakers, investors, and economists still refer to the “Greek, Irish, Portugal and Cyprus’ bailouts.”
The biggest threats don’t come from the periphery but the core. The peripheral countries were not bailed out, but the official and many private sector creditors were made whole.
I hosted a lunch with a central banker from Italy a year ago. As we discussed the state of the banks in Europe, he asked, “Who do you think has spent the least amount of money to bailout out its banks: Germany, the UK, or Italy?” Nearly everyone was surprised that Italy has hardly spent a red cent of taxpayer money for such purposes.