People have big hopes from the EU Summit in Brussels. All attention is on how Greek crisis will be solved. People are bullish that some relief will come after the talks in Brussels. Also, this week countries like Belgium, Italy, and Spain are set to sell more debt securities. Will be interesting to see how markets react. This all sounds alright.
What is interesting to me is the mind-set of people involved.
Clearly, negotiations with creditors and availability of rescue funds buys more time and reduces the probability of the event (at least in the short term). However, it increases the potential negative consequences that might arise in light of a collapse.
What do you think? Mathematically, here is what it looks like:
(Probability of failure) X (Consequences of failure) = Failure Impact
EU leaders want to reduce the probability of failure at the cost of greater negative consequences. Doesn't look like a smart move to me.
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