The same pattern again. The EU agrees a pact, and the markets are panicking. This time it took them only a few hours. The EU’s credibility is sinking with each agreement.A sentiment which is echoed by the Financial Times: Insolvent – Greece, Ireland, Portugal and probably Spain.
We are now fast approach default time. Yields have been rising in Spain and even Italy yesterday afternoon, and the situation continued to deteriorate overnight. We at Eurointelligence consider a default of Greece, Ireland, and Portugal a done deal. The question is only now whether Spain can scrape through. Since the higher interest rates themselves have a massively adverse impact on the situation, the probability of a Spanish default/restructuring are increasing by the hour. Italy and Belgium have also made it on the Richter scale of investors – and there are extreme external scenarios under which the solvency of both countries could be also be questioned.
Hang on to your seats everyone. This is going to be a bumpy ride.