Investors flooded into the safe arms of German bonds Monday, and European banks dialed back lending to their riskier peers, in a clear sign that fears of a destabilizing collapse in Greece persist despite fresh efforts over the weekend to shore up the troubled country's finances. The alarm sounded across Europe's beleaguered periphery. Early in the day, Italy paid a steep price to issue short-term treasury bills, borrowing for three months at the same rate the U.S. commands for 10 years. Bond yields in Spain and Portugal rose, too. Greek bonds were at panic levels: more than 20% for 10-year lending and 75% for two, though few buyers were willing to take the plunge. The big mistake by design (Germany is also in dire straights - it is NOT a strong economy since it has no assets or resources) -German government-bond yields meanwhile fell to record lows—1.72% for 10-year bonds—as investors sought the security of the Continent's strongest economy. The action was a disquieting response to a furious bid by Greece to raise fresh cash. Sunday, the country's finance minister outlined a plan to cover a €2 billion ($2.73 billion) shortfall with a special property tax—to be collected on property owners' electric bills, the better to be assured it is actually paid.
Access Investments-Building Awareness - European Union-ROMANIA
Tuesday, September 13, 2011
Investors flooded into the safe arms of German bonds Monday, and European banks dialed back lending to their riskier peers, in a clear sign that fears of a destabilizing collapse in Greece persist despite fresh efforts over the weekend to shore up the troubled country's finances. The alarm sounded across Europe's beleaguered periphery. Early in the day, Italy paid a steep price to issue short-term treasury bills, borrowing for three months at the same rate the U.S. commands for 10 years. Bond yields in Spain and Portugal rose, too. Greek bonds were at panic levels: more than 20% for 10-year lending and 75% for two, though few buyers were willing to take the plunge. The big mistake by design (Germany is also in dire straights - it is NOT a strong economy since it has no assets or resources) -German government-bond yields meanwhile fell to record lows—1.72% for 10-year bonds—as investors sought the security of the Continent's strongest economy. The action was a disquieting response to a furious bid by Greece to raise fresh cash. Sunday, the country's finance minister outlined a plan to cover a €2 billion ($2.73 billion) shortfall with a special property tax—to be collected on property owners' electric bills, the better to be assured it is actually paid.
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German Chancellor Angela Merkel sought on Tuesday to quash talk of an imminent Greek default as the United States voiced fresh concern at the euro zone's inability to master its debt crisis.
Merkel said in a radio interview that Europe was doing everything in its power to avoid a Greek default and urged politicians in her own coalition to weigh their words carefully to avoid creating turmoil on financial markets.
Asked by RBB inforadio whether a Greek default would doom the euro, she answered: "We are using all the tools we have to prevent this. We need to avoid all disorderly processes with regards to the euro."
Calling Europe's challenge "historic," Merkel added that everything must be done to keep the euro zone intact "because we would see domino effects very quickly."
Read more: Merkel Rejects Greek Default, Defends Euro Zone Integrity
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