If all members of the eurozone would rejoin happily today, they would be extreme masochists
Is the eurozone crisis over? The answer is: “yes and no”. Yes, risks of an immediate crisis are reduced. But no, the currency’s survival is not certain. So long as this is true, the possibility of renewed stress remains.
The best indicator of revived confidence is the decline in interest-rate spreads between sovereign bonds of vulnerable countries and German Bunds. Irish spreads, for example, were just 205 basis points on Monday, down from 1,125 points in July 2011. Portuguese spreads are 465 basis points, while even Greek spreads are 946 basis points, down from 4,680 points in March 2012. Italian and Spanish spreads have been brought to the relatively low levels of 278 and 362 basis points, respectively. (See chart.)