What was meant to be a quiet, sunny day in the financial markets turned into the usual ‘European doom & gloom.’ The Eurozone has managed to keep itself under wraps and out of the media for some time, but bond sales today has changed all that.
Bond sales now pushed through the 7.5% in Spain, as investors demanded higher returns for what they view as a ‘fairly risky’ investment. The 7% level is often seen as the level at which an economy cannot sustain debt. We have seen Greece and Ireland fail as their bond prices exceeded this 7% mark, the market view of Spain is no different. The Spanish themselves are in split on what they can do about their situation. Some within the government claim that they have done all they can with regards to Austerity whilst others, such as PM Rajoy, seem defiant to undertake further Austerity measures.
Germany has stated clearly that they feel that enough has been done to help Spain and that they are reluctant to make any additional contributions to the European Union. The suggestion of expansion of bail-out funds to the banks has been met with a fairly firm ‘absolutely not.’ On one side you can understand the Germans concern on taking on more debt, but on the other, being a bully and pointing the finger won’t help either.
Somehow I get the feeling there is more to come from the Eurozone this week (JKM)