This is a risky development. The Central Banks have put a line in the sand on this. That is always a mistake. When a CB says links of london sale, “Such and such will never happen” you are going to get people (like me) saying, “Oh, really?” The very fact that they are saying, “that is rubbish” just fans speculation links of london.

Greek PM Papendreou proposed a cutback in 2010 expenditures to 8.5% of GDP (down from 12.7%) as a way to instill confidence. For me that is, ‘rubbish’. It will not work. If cuts like that are made there will be social consequences. That instability will just fuel the sovereign ‘flight risk’ issue. This problem will not go away with just that proposal on the table valentine’s bracelet .

The Central Banks have drawn a line in the sand for good reason. They do not have a choice. The countries that are at risk have issued mammoth amounts of debt in Euro’s. If some form of two-tiered Euro were the result the cost of revaluing the debt for both the public and private sector would be devastating valentines Day rings .

The flip side is that the countries that are suffering have no policy options available to them. They can’t provide a meaningful stimulus because of the Euro link and limitations on budget deficits that the link mandates. At some point this will become untenable. The argument that a two tiered Euro would stimulate both the tourist and industrial economies of Greece, Spain and Ireland (Italy too) becomes compelling.