What if a euro-area sovereign-debt blowout sparked contagion?
A euro-area spread blowout (OAT/BTP) or large EM default sparks contagion via the vol channel: VIX spikes, risk-parity deleveraging mechanically sells equities and crypto, and HY/financials lead lower. Rhymes with the 2011-12 euro sovereign crisis (pre-'whatever it takes') and the 2018 BTP spread shock. Forward angle: France is now the fragile core — an OAT-Bund blowout with no easy political fix is the live risk, and the ECB's TPI backstop is untested at scale, so the first leg can overshoot before any 'whatever it takes' floor appears.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. A euro-area spread blowout (Italy/France) or large EM default sparks contagion. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Geopolitical risk ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.