Of course, this is no war in Europe.
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I couldn’t decide whether to post this here or in the Italy & France “reinstate borders” thread. But here goes…
The debt crisis in Europe continues to worsen (no surprise!). Yesterday Portugal reported that their deficit was much worse than previously expected:
http://www.guardian.co.uk/business/2011/apr/26/greece-portugal-debt-worse-than-thought
Greece followed up today with similar news:
http://www.telegraph.co.uk/finance/economics/gilts/8474725/Hole-in-Greek-finances-bigger-than-thought-as-bond-flight-continues.html
From such events, wars often arise (particularly when certain nations [Germany] have continued bailing out Portuguese and Greek welfare recipients).
Greece’s 10 year bond went over 15% today.
I wouldn’t want to be living in Cyprus.
Since I talked in circles the other day using the Euro as the alternative when the dollar goes into free fall, but also suggested the EU is about to break up… One currency jumps out as the obvious safe haven – the Swiss Franc. They wisely did not join the EU. The 10 year Swiss Bond only pays 2%, but the money may still be there in 10 years.
Ouch… the markets are finding PIG debts to be less than Kosher. Greece bond rates now at 25%!
http://www.telegraph.co.uk/finance/economics/gilts/8478246/Markets-shun-debt-of-rescued-nations.html
For a comic view on the situation, Australian comics Clark & Dawe explained the European bailouts in this youtube video:
http://www.youtube.com/watch?v=I5QwKEwo4Bc
That video was brutal (and great!)… every word in the thing had a point.
To reconcile the two numbers, the 25% rate is on 2 year bonds, the 16% is on 10 year. Greece is part of the Euro community, so the premium over Germany’s 3.29% is almost all default risk. The purpose of CDS markets is (in theory) to calibrate the probably of default. As of yesterday, the “implied default probability” on 5 year Greek debt was 66%. No gyros for you!