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CANNES, FRANCE - NOVEMBER 03: US President Barack Obama is welcomed by the French President Nicolas Sarkozy to the G20 Summit on November 3, 2011 in Cannes, France. World's top economic leaders are attending the G20 summit in Cannes on November 3rd and 4th, and are expected to debate current issues surrounding the global financial system in the hope of fending off a global recession and finding an answer to the Eurozone crisis. (Photo by Dan Kitwood/Getty Images)
Aren't you glad we don't have Greece to worry about anymore? After two years of crisis, the Greek economy is in full meltdown mode and the country's political system is falling apart. It has no hope of paying back its debt. The only question now is whether it will remain the Euro currency union, or whether default and bankruptcy will mean a return to drachma.
We now turn our attention to Italy, number three in economic size, behind German and France. There's enough money sloshing around the euro currency union to deal with Greece and similar small economies, but if Italy can't refinance its 1.9 trillion euros of debt, a bailout isn't currently a realistic option.
Unless maybe the Chinese pitch in. China has more than $3 trillion in foreign currency reserves, which it could pump into Europe. The question is what this would ultimately cost Europe, in terms of various trade-offs (pun intended), not to mention what it would cost China itself. This is Yu Yongding, former member of China’s central bank monetary policy committee, writing recently in the Financial Times: