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Right you are, ECB did not get involved until later (as far as we know).

So, corrected version:

A Eurozone introduced
1 Periphery gets its currency rates looked to the core. Periphery gets stuff and core gets claims, that are placed in periphery debt (private or public)

B Great Finance crisis
1 Banks all over the eurozone suffers from structural insolvency. ECB gets mighty afraid of domino effects.
2 Banks fall in Ireland, ECB forces Irish taxpayers to guarantee the banks. Irish politicians take leave of their senses and guarantees the banks.

C Eurozone crisis
1a Speculators see that Greece and Ireland can not defend its government debts as EMU rules dictates cutbacks in recession. Run on debt starts.
1b ECB makes it clear that they will not accept defaults of any kind.
2 Speculators see that Spain (and Portugal?) can not defend total debts as ECB will force governments to take over private debt (see B2). as they are expected to guarantee their banks. If debt is taken over, ECB will stop any defaults (see 1b). Run on debt continues.
3 ECB answers by demanding more cuts and privatisations. And then puts up limited warchests in defense of debts.
4 Speculators see warchests as poorly locked treasure chests.
5 States income falls as economy is strangled. More loans needed.

Repeat C3 through C5 a couple of times, and here we are.



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by A swedish kind of death on Sun Jun 19th, 2011 at 03:08:25 PM EST
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