eurozone debt crisis timeline
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Soaring Spanish Bond Yields Another Hit to Growing Eurozone Debt Crisis
Investors today (Monday) have been selling on news that Spain might need more bailouts as its 10-year yield reached a record high.
Spanish bond yields reached a record high of 7.56% and the latest unemployment rate sits at a miserable 24.6%.
Global stock markets plummeted Monday after Spain's borrowing costs soared on a third consecutive day amid concerns that an intensifying recession in the region would require Spain's government to request a full-fledged bailout.
The fresh worries come on the heels of a report Friday from the Valencia region, revealing that its economy would contract by 0.5% in 2013 instead of 0.2%, as had been forecast.
Spanish bond yields broke the critical 7%-mark last Thursday, a level many analysts worry could eventually alienate Spain from public markets and force it to seek a bailout similar to its ailing neighbor Greece.
"Those levels indicate that Spain may soon struggle to fund itself in the market and therefore unless some positive action is taken, the country will need a full bailout," Gary Jenkins, managing director of Swordfish Research told the Associated Press.
The deeper worry rattling markets worldwide is that with so many of its 17-member nations needing bailouts, European finance ministers will have a tough time finding funds to rescue an economy as large as Spain. Spain is the region's fourth-largest economy after Germany, France and Italy.
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The Next Phase of the Eurozone Debt Crisis
Today (Monday), as we digest what happened in Europe, the obvious question arises: What comes next for the Eurozone debt crisis?
For starters, the heads of state coming out of the Council of Europe meeting last week pledged to have the new structure by July 9, even though the new stabilization mechanism will take longer to phase in.
For the first time, there will be a greater accountability (and control) over continent-wide commercial banking and access to some underwriting of debt coverage. It also means that national banking systems will need to relinquish some oversight to the European Central Bank (ECB).
For months, a number of people (myself included) have insisted that the solution to th e Eurozone debt crisis requires greater financial integration. The shortcoming seemed rather straightforward.
The EU had ushered in a more centralized monetary system (single currency and all that) but had no centralized fiscal system to parallel it. Simply put, that required adherence to currency rules without any ability to coordinate the credit and fiduciary end of the spectrum.
Well what came out of the Council in the early hours of Friday will not solve the debt problem in Spain , Italy , Portugal, or Greece. There is no magic short -term fix. But it might just provide the underpinnings for a credit system that may begin to operate.
The banks are the problem right now.
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Eurozone Debt Crisis: EU Reaches Bailout Deal
The recent marathon session in Brussels was the EU Council's 18th meeting on the Eurozone debt crisis. As it is comprised of the heads of government from European Union members, the Council was largely thought of as a grand debating society.
Not this morning.
In what may well be the first glimmer of light at the end of the tunnel, the EU will agree to coordinate bailouts across the continent. The details are still incomplete, and there is always devil in the details.
In addition, EU members must approve the substantive plan, meaning more coming politics in parliaments from London to Warsaw.
So this is not a done deal.
Actually, until there is some flesh on the bones, we are still uncertain what the "deal" really is.
But this much we do know.
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EU Calls for "Banking Union" to Ease Eurozone Debt Crisis
Blame the tumultuous tumble in equities Wednesday on Europe.
World markets were shaken as worries over the Eurozone debt crisis, in particular the Spanish banking system, again rattled investor confidence.
The Dow Jones was down 160 points, the S&P 500 fell 19 and the Nasdaq lost 34.
Sending shivers through markets Wednesday was a statement from the European Central Bank (ECB) saying it had not been consulted on the bailout for Spain's No.4 bank Bankia, and that such a recapitalization could not be provided by the Eurosystem. Spanish lender Bankia announced last week it needs $23.8 billion in state aid.
Also weighing on markets was Spain's debt downgrade late Tuesday by independent ratings agency Egan Jones. The move sparked more questions about the ailing country's ability to fund bank bailouts that could balloon to some 100 billion euro.
A number of other Spanish banks have recently been downgraded by various rating agencies. The woes hanging over Spain and its sickly banking system shoved the euro down to a near two-year low Wednesday of around $1.24.
"I believe that the markets have not yet fully priced in a Greek exit, nor the full implications of a Spanish default - both of which remain distinct possibilities in my mind," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "Until they do, expect trading to be an unholy mess of rallies driven by hopes for further bailouts, and short, sharp declines driven by the absence of the same."
Now the EU has a new bailout plan.
