The spectre of default stalks the eurozone

A popular narrative has taken hold across much of the eurozone. The economic situation, so the story goes, is improving, or at least bottoming out, and the necessary institutional reforms are being put in place. True, progress is messy and imperfect given the politics, but the currency union is on the right track. This narrative, however, is complacent. The economic situation remains grim, not least because of a failure to strengthen the region’s banks. And there is a disconnect between the scope of the reforms under discussion and the scale and immediacy of the crisis. This bodes ill for the solvency of Italy and Spain

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