Investors Get Jittery As Spain Enters Whole New World of Pain…”Even chief financial alchemist Draghi is unable to prevent gravity from taking hold.”
By Don Quijones
WolfStreet.com
September 8, 2015
After a summer of missed opportunities, poisoned rhetoric and bitter recrimination, Spain faces what promises to be a very tumultuous autumn.
On September 27 its largest economic region, Catalonia, will hold its most important elections since Spain’s late dictator Francisco Franco passed away 40 years ago. If the pro-independence parties win a majority of seats in Catalonia’s parliament, they have pledged to declare unilateral independence from Spain.
As if that were not enough, in December the country will hold what could turn out to be its most tightly fought general election in decades.
ECB at a Loss
The inevitable result is increased fear and uncertainty – two things that financial markets generally abhor. It’s already beginning to show in the performance of Spanish bond yields. Indeed, as Bloomberg reports, the political instability gripping the nation is having such an effect on investor sentiment that even Europe’s chief financial alchemist Mario Draghi is unable to prevent gravity from taking hold:
Even signals from ECB President Mario Draghi last week that asset purchases could be extended if Europe’s economic and inflation outlook continues to deteriorate haven’t stopped Spanish bonds diverging from Italy’s.
“These moves have some more to run in the coming months, as elections approach,” said Jan von Gerich, chief strategist at Nordea Bank AB in Helsinki. “The main opposition parties are campaigning for a reversal of the earlier reforms. Forming a government will be very hard.”
The Rest…HERE
