July 12th, 2011
I don’t know how the final days of the Euro saga will pan out.
The only thing I’m sure of is that it will be very ugly and it’s demise won’t do us Brits any good unless you have a formula for pricing in Schadenfreude. I’m also staggered by the decision of the ECB to raise interest rates a quarter of a point to 1.5%.
So the big spike yesterday in the yield of Italian and Spanish bonds suggests to me that we are approaching the Euro endgame. Bailing out Greece is one thing. Supporting Spain and Italy would be an impossible other. If the yield goes to a fatal line of 7% according to Ambrose Evans-Pritchard in today’s DT, then it’s game over. Below is a chart of the Italian 10 Year Bonds. Spain is worse – just over 6%.