Moral Hazard Expands from Private to Sovereign Bailouts

The Moral Hazard problem which I first wrote about in 2008 (see http://bondbubble.info/ ) is now threatening to expand to Sovereign Debt as Europe worries what kind of precedent a bailout of Greece would have on Portugal, Spain, etc. On the other hand, withholding support to Greece (and Portugal and Spain, etc.) could spell the end of the EU. A good article summarizing the quandary can be found here.