Asian powers spurn German debt on EMU chaos

Friday, November 18, 2011
By Paul Martin

Asian investors and central banks have begun to sell German bonds and pull out of the eurozone altogether for the first time since the debt crisis began, deeming EU leaders incapable of agreeing on any coherent policy.

By Ambrose Evans-Pritchard
Telegraph.co.uk

Andrew Roberts, rates chief at Royal Bank of Scotland, said Asia’s exodus marks a dangerous inflexion point in the unfolding drama. “Japanese and Asian investors are for the first time looking at the euro project and saying `I don’t like what I see at all’ and fleeing the whole region.
“The question on everybody’s mind in the debt markets is whether it is time to get out Germany. The European Central Bank has a €2 trillion balance sheet and if the eurozone slides into the abyss, Germany is going to be left holding the baby. We are very close to the point where markets take a close look at this, though we are there yet,” he said.

Jean-Claude Juncker, Eurogroup chief, fueled the fire by warning that Germany is no longer a sound credit with debt of 82pc of GDP. “I think the level of German debt is worrying. Germany has higher debts than Spain,” he said.

“It is comforting to pretend that southerners are lazy and Germans hardworking, but that is not the case,” he said, slamming France and Germany for their “disastrous” handling of the crisis.

German Bunds have already lost their status as Europe’s anchor debt. The yields of non-euro Sweden are now 20 basis lower for the first time in modern history. Danish and UK yields are higher but have closed most of the gap over recent months.

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