The EU – From Crisis to Crisis

0
Share

And there goes Spain. While we were watching Italy, Spain was experiencing a spike in borrowing costs. Associated Pravda reports: In Spain, an auction of 10-year bonds left the country paying interest rates of nearly 7 percent, the highest rate since 1997. Economists see that level as unsustainable because it would make the interest payments on Spain’s debt so high that the government would barely be able to afford them. Greece and Ireland were forced to seek rescue loans from the European Union after their bond yields jumped above the same level.

Then there is France, the cost to insure French debt soared this week. France’s problem is that it simply has been living beyond its means for way too long with benefits such as a 32 hour work week. While not as bad as Italy, France has a very high debt. Its government debt is around 1.3 trillion euros equates to a debt-to-GDP ratio of around 83%. That is low in comparison to Greece, which is at 140%, and Italy, which is at 120%, but it is high for a country that has a perfect triple-A credit rating, and much higher than the United States, which lost its triple-A rating earlier this summer.

The EU nations are screaming for the ECB to go into the markets full force but Andrea Merkel is holding out against the rest.

“I’m convinced that none of these approaches, if applied right now, would bring about a solution of this crisis,” Merkel said. “If politicians believe the ECB can solve the problem of the euro’s weakness, then they’re trying to convince themselves of something that won’t happen.”

in the end, a compromise will likely be reached that combines the ECB and reforms.


Share