Despite the ECB humbling and devaluing itself just a week ago – there are virtually no signs that it ever had any effect. The bail- out was designed to protect European banks and debtor nations. Neither is working only a week after.
Debt fears are back and growing and a couple of banks are nearing the cliff edge – my favourite German leper – Commerzbank is slipping down and down even as lots of its shares are trading hands. High volume and going down – a bad karma combo.
At the level of nations, today Spain, the next country on the debt/default hit list, failed to sell its debt. A bond auction fail!
When you can’t sell your debt you are a dead man walking. It happened to Greece and before them Ireland, Estonia and Iceland.
Madrid put up €8bn of new debt to sell. It quickly had to offer record interest, but even then failed to attract enough buyers. They ONLY just had enough buyers to cover the amount which means they had absolutely no means of holding down the yeild/ interest. So they did the only thing they could do, withdraw €1.56 Billion of the debt so as to create a manageable buyer-to -issue, (called a bid to cover) ratio. To make matters worse, this was short term debt. Which should have been easier to sell. Tomorrow they are going to try to sell 10 year debt.
I suspect the ECB may have to be on call to make sure the customary miracle occurs and buyers ‘snap up those bonds’.
This is only a couple of months after Portugal had trouble selling their debt.
This is not over. These failures mean that there will be even more pressure put upon Greece, Spain and Portugal to announce even deeper, even faster cuts. Such pressure on Greece will kill it and could indeed lead to its exit from the Euro and default. The same pressure on Spain and Portugal will lead to their banks taking a rate cut before long. Due to increasingly beak prospects for growth restoring their balance sheets.
At what point will anyone stand up and admit that the policies we have been forced to follow have failed? Debt will out. Like blood.
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