Europe’s dominant powers and institutions are for the first time willing to risk a Greek default and ejection from the euro if Athens refuses to comply with austerity demands, calculating that the eurozone system is now strong enough to withstand a contagion shock. The European Central Bank’s flood of cheap credit for three years has removed the immediate threat of a banking crisis and proved a powerful tonic for confidence, transforming the character of the crisis. Bond yields have plummeted in both Italy and Spain since November, largely decoupling from the ups and down of daily events in Athens. The effect has ... (full story)