Friday, October 12, 2012

The yield on Spanish 10-year government bonds rose sharply Tuesday back above 6pc for the first time in over a week following a meeting of eurozone finance ministers where there was no movement on a possible Spanish bailout.
In early trading the yield rose to 6.095pc on the secondary market, compared to 5.714pc at Monday's close. It had been below 6pc, a level considered by many economists to be unsustainable in the long term, since September 28.
"At the Eurogroup meeting, no progress was made on other 'hot' topics which gather attention today, chief among them being the expected request by the Spanish government for a precautionary credit line from the ESM," said Credit Agricole economist Slavena Nazarova.
The eurozone on Monday unlocked its €500bn crisis war chest, the European Stability Mechanism (ESM) as Spain agonised over whether to seek a full bailout.
Spain's heavy debt refinancing burden and high borrowing costs are widely expected to force it to seek a bailout soon, with market pressure likely to rise on Madrid as it faces some 30 billion euros in repayments this month.

5 comments:

Anonymous said...

Austerity and growth are mutually exclusive, so there will never be growth unless steps are taken to promote it. For example rather than using QE to prop up the dysfunctional banks so that the banksters can continue lining their pockets at our expense, this money should be invested directly into the infrastructure, which in turn will stimulate growth.

But that's bloody obvious isn't it? So the only reason that it is not being done is because the idiot European politicians are all signed up to this neo-liberal bollocks that insists that a broken free market can somehow miraculously repair itself without direct government intervention!

Anonymous said...

In a speech in Japan, the managing director of the International Monetary Fund warned that advanced economies are burdened with debt levels that are unsustainable in the long term.

In a blunt assessment of the situation today, Lagarde warned that the public debt levels across leading economies were at their highest in sixty years, throwing into question their ability to deliver welfare commitments and building new infrastructure.

Anonymous said...

In a speech in Japan, the managing director of the International Monetary Fund warned that advanced economies are burdened with debt levels that are unsustainable in the long term.

In a blunt assessment of the situation today, Lagarde warned that the public debt levels across leading economies were at their highest in sixty years, throwing into question their ability to deliver welfare commitments and building new infrastructure.

Anonymous said...

Spain's finance minister has rebuffed the rumour that Germany is holding Madrid back from a bailout.

Speaking in Japan, Luis de Guindos replied "absolutely not" when asked whether Spain's bailout request was being held up by political issues rather than the need for more technical details.

He added:


There was no pressure, in one sense or in the other.

De Guindos also insisted that Spain would not be pushed into seeking financial help by a ratings agency (following S&P's decision to slash its rating to one notch above junk).

Anonymous said...

A split appears to be opening up between the International Monetary Fund and eurozone leaders, following the IMF's admission this week that austerity is more damaging than it thought (see 8.20am).

Germany's finance minister, Wolfgang Schäuble, and EC commissioner Olli Rehn have both taken issue with Lagarde after she called for more caution on austerity.

The attacks came after the IMF published, and then endorsed, a survey that declared that world governments (and the Fund) have systematically underestimated the damage done to growth by austerity.

First came Schäuble, who argued that it made little sense to tackle high debt levels by deliberately making them higher.

The FT has the quotes:


When there is a certain medium-term goal, it doesn’t build confidence when one starts by going in a different direction

When you want to climb a big mountain and you start climbing down the mountain, then the mountain will get even higher.

Olli Rehn then weighed in a couple of hours later, telling CNN that Schäuble "had a point"


The EU cannot be making swift turns, rather it is a convoy and you have to carefully consider which policy turns are best.

But the implications of the IMF's study are clear (and vindication of Keynesian types who have railed against Europe's passion for imposing deep cuts on countries struggling with high debt levels)