Moreover, the grand bargain between the eurozone core, the ECB, and the periphery painful austerity and reforms in exchange for large scale financial support is now breaking down, as austerity fatigue in the eurozone periphery runs up against bailout fatigue in core countries like Germany and the Netherlands.

That is where the eurozone is today. A debt crisis that erupted in Greece, the eurozone s outer periphery, has migrated with a vengeance towards the core, so much so that the survival of the eurozone itself is at stake.

At the same time, the eurozone crisis remains unresolved, despite the ECB s bold actions and talk of a banking, fiscal, economic, and political union. Specifically, Greece, Portugal, Spain, and Italy are still at risk, while bailout fatigue pervades the eurozone core.

The most significant problem would be capital losses for core eurozone financial institutions. Overnight, the foreign euro liabilities of Greece s government, banks, and companies would surge.

In 2010, attention was focused on responses to the crisis on the eurozone periphery Greece, Portugal, and Ireland. In 2011, the crisis moved to the core, with Italy and Spain feeling the heat, and concerns mounting about the viability of the eurozone itself.

Meanwhile, growth in Germany and the eurozone core may further accelerate given the strength of emerging markets, which may show even greater resilience, underpinning more rapid global expansion.

Core Non core

Meanwhile, Germany s insistence on imposing losses on bank creditors in Cyprus is the latest symptom of bailout fatigue in the core. Other core eurozone members, eager to limit the risks to their taxpayers, have similarly signaled that creditor bail ins are the way of the future.

The eurozone crisis will not be resolved until this internal imbalance is reduced to a sustainable level, which requires not only fiscal adjustment in the troubled peripheral economies, but also balance of payments adjustments across the eurozone as a whole. That, in turn, implies the need for a real exchange rate adjustment inside the eurozone, with peripheral countries production costs falling relative to those in the core.

Evidently, investors were supposed to infer that for all practical purposes they should think of Spanish and German debt as identical the old hubris of the eurozone. My own sarcastic reaction was to think, Oh, now the IMF thinks that some of the core eurozone countries are a default risk.

Scotching the Eurozone

Demokratisasi di Eurozone

Optimizing the Eurozone

Poland s Eurozone Tests

Rebalancing the Eurozone

Many details would have to be worked out. But this may be a vision that gives Europe a chance to remain big and inclusive, while retaining the politically integrated core that the eurozone needs.

Sustaining the Unsustainable Eurozone

Alexander Hamilton s Eurozone Tour

Down with the Eurozone

London vs. the Eurozone

Core

CORE

Core

These amounts consist of core and non core resources.

The third stage of the eurozone crisis will arrive when the economic strength of the core is in doubt. Those very doubts undermine the credibility of the safety net that has been supporting the European periphery.

Frankfurt is a divided city, policy wise the Bundesbank opposes quantitative easing and negative policy rates, while the European Central Bank is ready to do more. But Germany s thrifty savers households, banks, and insurance companies are furious about ECB policies that tax them (and others in the eurozone core) to subsidize the eurozone periphery s alleged reckless spenders and debtors.

Moreover, Greece could exit the eurozone in 2013, before Spain and Italy are successfully ring fenced Spain like Greece is spiraling into depression, and may need a full scale bailout by the troika (the ECB, the European Commission, and the International Monetary Fund). Meanwhile, austerity fatigue in the eurozone periphery is increasingly clashing with bailout fatigue in the core.

Goal 4 Core and non core resources aligned with commitments

The Government the Eurozone Deserves

Eurozone Budgets Under the Spotlight

Growing Up in the Eurozone

Decision Time for the Eurozone

Golden Rules for the Eurozone

Judgment Day for the Eurozone

The Emerging Economies Eurozone Crisis

Throughout the crisis, it has been widely assumed at least so far that the eurozone core would remain solid, and would continue to write the checks for the periphery s distressed governments and banks. That assumption appeared plausible.

IPTC Core

Core budget

Core responsibilities

Kill Core

Core File

Core Developer

Core developer

Core Developer

Core Developer