Monetary union among economically and culturally heterogeneous countries, each with distinct fiscal policy at the national level, is the origin of Europe's problem.
-Andrew Bosomworth, managing director, PIMCO
- So long as the fundamental issues about the future of the eurozone remain unsolved, the extra supply of ESM bonds will likely drive up the borrowing costs of its weaker stakeholders.
- Without a cap on or exit clause from additional capital calls, the ESM could lead northern eurozone countries down a difficult and unsustainable path.
- With doubts about the ESM's ability to sustainably lower the long-term borrowing costs of vulnerable eurozone countries, and with the ECB indicating it will intervene to keep Spain and Italy's short-term borrowing costs low, the credit curves of eurozone peripheral government bonds are set to remain steep.