Econintersect Eurocrisis News Digest: Spain’s ability to borrow at reasonable rates hit a wall today with treasury auctions hitting near record levels for short term debt. It’s long term financing is already at record levels since Spain joined the Euro.
Spanish five-year government bond yields rose above 10-year yields which is an indication the market sees a growing default risk. Contagion to Italy remains, but the big blow came from Moody’s yesterday:
Moody’s Investors Service has today revised to negative from stable the outlooks on the Aaa sovereign ratings of Germany, the Netherlands and Luxembourg. In addition, Moody’s has also affirmed Finland’s Aaa rating and stable outlook.
All four sovereigns are adversely affected by the following two euro-area-wide developments:
1.) The rising uncertainty regarding the outcome of the euro area debt crisis given the current policy framework, and the increased susceptibility to event risk stemming from the increased likelihood of Greece’s exit from the euro area, including the broader impact that such an event would have on euro area members, particularly Spain and Italy.
2.) Even if such an event is avoided, there is an increasing likelihood that greater collective support for other euro area sovereigns, most notably Spain and Italy, will be required. Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form.
These increased risks, in combination with the country-specific considerations discussed below, have prompted the changes in the rating outlooks of Germany, the Netherlands and Luxembourg. In contrast, Finland’s unique credit profile, as discussed below, remains consistent with a stable rating outlook.
Eurocrisis News Summary:
Low growth pushes UK Government deficit up 11.7% on last year
– http://www.markit.com/
Relentless market pressure pushes Spain closer to bailout
– http://www.reuters.com/
Italy’s Monti rules out new EU crisis meet
– http://news.yahoo.com
Italian Prime Minister Mario Monti on Monday ruled out holding another emergency EU summit on the eurozone crisis despite a new wave of market fears about Spain’s ability to contain its debt.UK inflation perceptions lowest since October 2010
– http://www.markit.com/
US Treasury official to visit Athens, Rome this week
– http://news.yahoo.com
A senior US Treasury official will travel to the capitals of Greece and Italy this week to discuss efforts to achieve economic stability and growth in Europe, the Treasury announced Monday.Professor Propaganda: Is German Economist Exacerbating Euro Crisis?
– http://www.spiegel.de/
Europe Officially Sinking In Dire Straits
– econintersect.com
Week ahead economic calendar [23 – 27 Jul]: GDP data to show second quarter growth trends in US and UK, while flash PMIs provide first clues at the start of the third quarter
– http://www.markit.com/
Moody’s says outlook for Germany negative
Moody’s on Monday warned the outlook for the economies of Germany, the Netherlands and Luxembourg was now negative, the first step toward a possible credit ratings downgrade.Open Letters and Closed Minds?
– econintersect.com
by Dirk Ehnts Hans-Werner Sinn and others have written an open letter (published at FAZ). They say that the banking union is not a good idea and that banks must be allowed to fail. They are against the socialization of bank debt. Their main argument is that bank liabilities in the euro zone are three times as much as sovereign (government) debt and, in the five countries in crisis alone, are in the trillions of euros…Refining oil: Stormy petrol
– http://www.economist.com/
Spain’s Economy Contracts
– http://online.wsj.com/
Eurozone debt crisis news today – Bangkok Post
– news.google.com
Globe and MailEurozone debt crisis news todayBangkok PostBERLIN: The eurozone debt crisis took a fresh turn for the worse after Moody’s threatened to cut Germany’s coveted top credit rating amid fears the bloc’s difficulties could tear it apart. MADRID: Spain’s borrowing costs rose, heaping pressure on the …Stocks, Treasury yields fall on Europe fears
– http://www.latimes.com/
BloombergNews: Greek PM Samaras seeks budget cuts ahead of euro officials’ visit | http://t.co/SC4Oeke7
FOREX-Euro down for 5th day on weak data, German ratings watch – Reuters
– news.google.com
AFPFOREX-Euro down for 5th day on weak data, German ratings watchReuters* German, euro zone PMI data weaker, dims euro outlook * Moody’s changes German rating outlook to negative * Troika visits Athens to relaunch economic plan * Spain bailout fears grow as yields stay elevated By Gertrude Chavez-Dreyfuss NEW YORK, …US oil price sinks $3 on eurozone strains
– http://news.yahoo.com
World oil prices plunged on Monday as eurozone debt strains spelled weaker demand for the commodity.Daily Economic Overview: Eurozone worries return to dominate market sentiment
– http://www.markit.com/
Ongoing Eurozone downturn drives rate of job losses to highest for two-and-a-half years
– http://www.markit.com/
Wall Street set for flat open; Europe, outlooks weigh
– http://www.reuters.com/
Euro-Zone Business Output Falls
– http://online.wsj.com/
Europe Dims German Outlook
– http://online.wsj.com/
Nürburgring Nightmare: Fabled German Racetrack Faces Bankruptcy
– http://www.spiegel.de/
