Karellen has stepped out of the European Central Bank, the mother ship and, despite the webbed wings, cloven hooves, tail and horns, his analysis of, and actions in, the eurozone have been accepted. (Italian spread is now below 380.)
Article 18 of the founding treaty of the European Central Bank permits the purchase of the bonds of sovereign states; such purchases will be unlimited, at the discretion of the ECB; the ECB will require the application of fiscal constraint in states seeking bond purchases; and any back-sliding on state undertakings will lead to no more bond purchases. What happens then was not spelled-out but, as Karellen remarked:
Even before the Overlords came to Earth, the sovereign state was dying.
They have merely hastened its end: no one can save it now--and no one
In order to restore confidence, policymakers in the euro area need to
push ahead with great determination with fiscal consolidation,
structural reforms to enhance competitiveness and European institution
Earthly, global institutions such as the IMF are more than welcome to join the ECB in its guidance of sovereign, member-states of the eurozone.
In the meanwhile growth will be slow to non-existent, inflation rising but contained. It is up to the earthly [ie member-states, ed.] powers to adjust their economies, and economic and financial institutions to avoid the need for, or meet the requirements for, a bailout.