Sunday, November 27, 2011

They Just Don't Want to Admit Defeat

The Euro-zone technocrats want to be able to say they saved the day. But denial ain't just a river in Egypt. Merkel's fight for German stability - Business Analysis

The markets are aware of the fact that Germany isn't big enough to bailout all of the struggling Euro-zone economies. (Even if you believe they only need 1 bailout.) So with the technocrats selling the idea of Euro-bonds, bonds basically backed by German taxpayers for the struggling economies, German debt got hammered.
So keen have investors been for Germany's AAA-rated bonds that they have eagerly switched into them, even though they paid less than 2 per cent. But advocates of the eurozone bonds failed to realise that pooling the peripheral nations' debt with Berlin's would pull up German yields.

The lesson came at the regular auction last week, when Mrs Merkel's government offered new debt to replace maturing bonds. Bids were received for only two-thirds of the issue. Rather than buy German bonds, investors became sellers.
German debt is now at 2.23%. (Bets on if it goes up?)

And the window-dressing of new governments hasn't pulled the wool over the eyes of the markets either.
Portuguese debt has just been down-graded to “junk” status. Short-term Italian debt is now trading above 8pc, deep into bail-out territory.
Spain's new government has vowed it will not need international assistance to get its house in order, but really only time will tell.

And of course, the German taxpayer isn't too keen on the notion of shouldering the burdens of the likes of Greece.
the vast majority of the German public are appalled at the idea of financing the rest of Europe. They resent not only the cost, but also (rightly) worry that one eurozone bail-out inevitably leads to another.
Greece, for example, apparently won't meet its commitments under the previous austerity measures, while they are still clamoring for the next payment of cash based on what the promised in the most recent austerity measures. Hasn't anyone heard that "Actions speak louder than words?" You can promise anything, but if you don't live up to your past promises, why should anyone believe anything you say?

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