Mark Dow has a great post assessing the market/economic situation as we begin 2015.
His comments about the Eurozone were depressing and, I thought, spot on.
Here's they key line: "In the absence of growth, the centrifugal political forces that were set in motion by the crisis will only gain momentum. I expect this to be a drawn out process, but it is what will ultimately lead to a reconfiguration of membership in the single currency."
In the 2010-2012, I never once bought the idea that anyone was on the verge of leaving the Eurozone. Even with the peripheral spread blowouts, I figured the political will (particularly among the elites) guaranteed that some solution would be found. And indeed a solution was found in the form of OMT, which essentially created a central bank backstop for Eurozone government debt. Since OMT was announced, borrowing costs have absolutely collapsed across the board. The acute threat of default that would force a country out has disappeared.
But the Eurozone has a much deeper problem than sovereign borrowing costs, and that is political rot. With growth non-existent and unemployment still sky high, anti-Eurozone parties are on the rise everywhere you look. The rise of the left-wing Podemos party in Spain is staggering. Marine Le-Pen's National Front is polling well in France. And Greece could easily be looking at an election in just over a month that could usher in the left-wing, anti-austerity SYRIZA to victory.
And the market has already begun to worry about SYRIZA and a return of the Grexit talk (as evidenced by the rise on Greek borrowing costs).
Whereas OMT was an elegant solution to make it easy for countries to borrow, there's no obvious equivalent bullet out there to create growth and restore political legitimacy.
As such, a "reconfiguration" of eurozone membership at some point in the future, looks increasingly likely.