Sovereign debt bubble thread

[MadImmortalMan]

France isn't the worry.  It's Greece and Spain.  The Spanish report on the economy said industrial output declined 7.5% last month - far worse than expected - and I think there's a lot more worry about the banks.

I read a story a few weeks ago about lots of Spanish engineers working in Germany. Question: Do these people pay taxes in Germany or Spain? Do they generate money transfers back home like Mexicans in the US do? It might not be as bad as it looks if so.

[Sheilbh]

They'll pay taxes in Germany.  I don't think there's a lot of intra-European transfers, though I could be wrong.

My anecdotal experience in London is that in the past year there's been a huge increase in the number of Spaniards (and Italians) over here.

[Iormlund]

Parents (especially middle class) will be protected by our dual-tiered labour market, so it doesn't make much sense to send them money. It's the young folk that have no jobs.

[Sheilbh]

Interesting comment by Monti this evening on Eurobonds:
'I am convinced it will happen, not immediately, but the time is getting nearer and I consider it positive and important.'

[Crazy_Ivan80]

Interesting comment by Monti this evening on Eurobonds:
'I am convinced it will happen, not immediately, but the time is getting nearer and I consider it positive and important.'

germany is not going to pay for the union. cause that is what bonds would be atm.

[Iormlund]

Yep. But of course that raises the question: if the biggest beneficiary doesn't want to pay for it, why should anyone else?

In related news bankrupcies in Spain went up 21% last quarter.

[alfred russel]

Yep. But of course that raises the question: if the biggest beneficiary doesn't want to pay for it, why should anyone else?

In related news bankrupcies in Spain went up 21% last quarter.

If Germany doesn't want to, I don't think anyone else has the option. The major eurozone countries are Spain, Italy, France, and Germany; Spain and Italy are obviously in trouble, and while France isn't in trouble right now it isn't especially strong either.

[Sheilbh]

germany is not going to pay for the union. cause that is what bonds would be atm.

That's not how Eurobonds work.

But this is what the markets still don't know - which is the biggest problem with all of the 'solutions' the Eurozone's gone through - is how far will Europe (mainly Germany) go to save its currency. 

Another indication that France isn't the problem is that their bond yields dropped today.  There was a flight to safety towards, not from M. Hollande.  I think that's an indication of the risks in the rest of the Eurozone.

[MadImmortalMan]

The yields just tell us who is going to hurt the most if the ship is scuttled. Safety is relative. The guy who sinks the boat might not be the first to drown.

[Sheilbh]

The yields just tell us who is going to hurt the most if the ship is scuttled. Safety is relative. The guy who sinks the boat might not be the first to drown.

Yeah.  But yields went down on French and German debt, they increased on Spanish, Italian, Portuguese and most other Euro-debts.  That the markets think French debt is a better bet than most of Europe undermines the argument that his election is what's caused this panic.  It isn't, it's the far more substantial problems in Greece and Spain.

Lord Mandelson is on magnificent form explaining everything on Newsnight

[MadImmortalMan]

The yields just tell us who is going to hurt the most if the ship is scuttled. Safety is relative. The guy who sinks the boat might not be the first to drown.

Yeah.  But yields went down on French and German debt, they increased on Spanish, Italian, Portuguese and most other Euro-debts.  That the markets think French debt is a better bet than most of Europe undermines the argument that his election is what's caused this panic.  It isn't, it's the far more substantial problems in Greece and Spain.

I think you missed my point. French debt is a safer bet than Spanish if the euro breaks. Even if it's the French who break the euro. So even if it's all France's fault, the logical thing for the bond trader to do is dump Spanish bonds and buy French and German.

So the yield changes in no way discount the election as a catalyst.

[Admiral Yi]

That's not how Eurobonds work.

It's part of how Eurobonds work.

But this is what the markets still don't know - which is the biggest problem with all of the 'solutions' the Eurozone's gone through - is how far will Europe (mainly Germany) go to save its currency. 

Seems to me a much bigger problem that markets don't know how far the problem countries will go.

[MadImmortalMan]

http://www.forexlive.com/blog/2012/05/08/spain-fell-into-the-abyss-and-no-one-even-noticed/

[Sheilbh]

Seems to me a much bigger problem that markets don't know how far the problem countries will go.

What do you mean?

[Iormlund]

Seems to me a much bigger problem that markets don't know how far the problem countries will go.

What do you mean by "how far"?