A closer look at the euro-zone policymakers’ new plan to “save the euro” has not altered our view that it will not bring the debt crisis to an end, especially since several key components of the deal already appear to be unravelling. Admittedly, this week’s three-year ECB refinancing operation should help the region’s banks and reduce the chances of a damaging credit crunch. But we doubt that banks in the region’s most troubled economies will go for broke and purchase vast quantities of their governments’ debt in a bid to bring bond yields down and avoid damaging sovereign defaults.
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