The State of the Euro Zone

by Veronique de Rugy

The Washington Post has a good and informative chart about the Euro zone.

Size of economy (GDP in U.S. dollars, 2011 forecast)

Government debt (Percentage of GDP, as of Q1 2011)

The cost of borrowing (ten-year-bond-yield spreads over benchmark German bonds)

What’s happening in Europe is really alarming if only because there isn’t a good way out of this mess. In fact, it seems that there isn’t even a bad way out of this mess. As you know in the last few days, Italy has emerged as the biggest focal point of the European sovereign-debt crisis/liquidity crisis. Tyler Cowen sums it up:

The Italian 10-year bond yield was up from 6.38 to 6.66, death spiral territory, and margin calls might soon kick in

These rates put Italy well into territory considered unsustainable by the markets. Unfortunately, this theory may be tested soon and we’ll find out what that really means not just for Italy but for the rest of the euro zone and eventually the US. 

More bad news here.