Euro Area

[gaelic cowboy]

You do have a knack for selectively picking things that support your argument, don't you?

Debt rates are high for the simple reason that nobody wants to buy those bonds. Germany's finances are good but not that good; the near-zero rates they get now are because everybody piles on eachother to buy that paper and thus create a self-reinforcing prophesy. Spain and Italy are in trouble, but because nobody buys their bonds it paints a bleaker picture than is actually justified.

German and French banks hold massive stakes in Spanish debt. Erasing that debt means letting Spain off the hook at the expense of France and Germany. Is that difficult to comprehend?

The banking union sounds like a good idea that's long overdue.

If there guaraunteed there money on short term paper why are they going up then these people only care about returns.

The fact is the ECB is causing it because institutions senority in bond purchases is in danger, why pay for senior bond status if the ECB is going to effectively claim Senior Senior status.

German and French banks had 4yr to get ready for this moment and essentially the ECB, national governments and various banks did absolutely to get ready for it. The ECB is effectively saying we must reward this insanity by paying back all senior bondholders the full amount with taxpayer cash, however at the same time we the ECB must be paid first. I cannot have senior status if the ECB is ahead of me so essentially people are concluding that senior status is really junior and is in danger of a cut.

At the moment there are only two ways out of the swamp
1: cut some of it so it's lower
or
2:restructure it into new longer term bonds

both of these reduce the burden on sovereigns and increase the likelyhood of some or all of the payment.

At the minute both options are completely off the table and so that only leaves only a total default hence Spanish bonds are rising.

The market has rightly concluded that there will be a bailout of Spain as there has not in fact been an agreement to ringfence bank debt from sovereign debt