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Men look at the IBEX-35 index curve on April 23, 2012 at Madrid's stock exchange. Top shares on the Madrid stock exchange slumped 3.24 percent in early trade, hammered by concerns over Spanish sovereign debt and the French presidential elections.
Well, it was only a matter of time before the zombie plague that is the European debt crisis once again lurched toward global markets, hungry for brains....brains...brains... I mean bailouts...bailouts...bailouts.... That's what Spain is now telegraphing, as the yield on the country's 10-year bond edged closer to the critical 7-percent mark, the point at which a bailout by European banking authorities would be necessary.
Spain's woes are very different from Greece's. Spain has a banking crisis that was brought on by a property boom. Greece borrowed to build a welfare state. For this reason, it's critically important that Spain's crisis be contained, because other banks have exposure to Spanish banks. Banks outside Spain.
Here's some insight from (of all places) Bermuda's Royal Gazette:
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German Chancellor Angela Merkel (L) and French President Nicolas Sarkozy (R) give a press conference after a working lunch at the Elysee palace on December 05, 2011 in Paris. France and Germany want summits of leaders of eurozone states to be held 'every month, as long as the crisis lasts,' Sarkozy said.
UPDATE: Well, that was brief! Reuters is reporting that S&P is back in sovereign-credit-downgrade mode. The agency has threatened to pull an America on the six eurozone countries currently in possession of an AAA rating — including France and Germany. We'll see how long this rally holds.
The latest surge in hope the Europe will be able to manage its debt crisis has caused the markets to rally over the past few trading sessions. However, the latest kinda sorta deal also reveals the schizophrenic situation that Germany keeps backing itself into.
On the one hand, Germany doesn't want to throw its weight behind a plan to make the eurozone work more like the U.S., where the Federal Reserve can function as the (nearly) undisputed central authority on matters monetary. On the other hand, Germany wants to call the shots of fiscal issues, compelling everyone else to act more like...Germany!
My continuing effort to track the eurozone crisis via Storify continues. And the outlook for the single currency just gets worse and worse. Greece, Italy, and Spain have joined Ireland and Portugal in the basket-case category. France is under threat as its borrowing costs rise, and now even Germany is having trouble getting investors to buy its bonds.
On the plus side, I think we're running out of countries in Europe to see infected by this.
Just because markets are up in the U.S., that doesn't mean Europe isn't still basically going to hell. The Eurozone hasn't been granted a reprieve simply because a few prime ministers have been sent packing. Greece still has massive debt. Italy still has massive debt. Spain still has massive debt. This may not end well. At least, it may not end with the euro surviving as a currency.
Storify tells the tale:Follow Matthew DeBord and the DeBord Report on Twitter.
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People walk by a National Bank of Greece in Athens on October 27, 2011. Greece reacted with measured relief on Thursday after European leaders sealed a deal to contain the eurozone debt crisis that slashes the country's huge debt by nearly a third. LOUISA GOULIAMAKI/AFP/Getty Images
Has Europe finally solved its debt-crisis problem? Well, that depends on who you talk to. Yesterday, hot on the heels of the announcement that European financial leaders had labored into the wee hours to finally get their act together to rescue Greece and save the Euro, I heard an economist say she was pleased that Europe had finally agreed on a plan...to agree on a plan!
Yeah, not exactly a ringing endorsement of Europe's ability to right its listing ship of states.
Meanwhile, around the blogspshere, various voices weighed in. At Reuters, Felix Salmon took a deep dive into the matter of credit default swaps (CDS) on Greek debt (although it wasn't nearly as deep as some). You're not going to want to wade into this debate unless you're prepared to induce a pounding financial headache, but the topline summary is fairly simple.