“The eurozone’s debt crisis is once again in danger of spiralling out of control..”
EMU debt crisis edges ever closer to the core
The eurozone’s debt crisis is once again in danger of spiralling out of control after yields on Portuguese debt spiked to a post-EMU high and contagion hit Spain and Belgium.
By Ambrose Evans-Pritchard
10 Jan 2011
The European Central Bank (ECB) intervened heavily in the markets, buying Greek, Irish and Portuguese bonds to drive down yields again, but has yet to broaden its emergency purchases to a fresh set of countries. Germany’s Bundesbank is vehemently opposed to policy “creep” that involves the ECB in fiscal rescues by the backdoor.
The bank’s refusal to be drawn further has left Belgium fending for itself as an escalating constitutional crisis pushes yields on its 10-year bonds to a post-euro record of 4.27pc. The country has not had a government since Flemish separatists emerged as the biggest party in elections seven months ago.
Stephen Jen, chief economist at Blue Gold Capital and a former IMF official, said Greece, Ireland and Portugal are already “insolvent”. Refusal to face up to reality draws out agony, with a “cancerous” effect on the whole eurozone.