Investors demanding high premiums for holding Italian and Spanish bonds as fears of double-dip recession grow

Stock market panic selling led to shares falling across the world with the FTSE100 down 128 points. Photograph: Frank Baron for the Guardian

Europe's sovereign debt crisis exploded back into life on Tuesday, with markets across the continent rocked by a wave of panic selling amid renewed fears about the impact of savage austerity measures in Spain and Italy.

The mood of uneasy calm seen across Europe since the Greek bailout in February was shattered as financial markets took fright at evidence of a double-dip recession and growing popular opposition to welfare cuts and tax increases.

Italy and Spain, the eurozone's third and fourth biggest economies, were at the centre of the market turmoil, with investors demanding an increasingly high premium for holding their bonds.

"Spain is right in the centre of a European storm," admitted finance minister Luis de Guindos, who declined to rule out an eventual bailout but insisted it could be avoided.

In Italy, Mario Monti's coalition government is facing growing hostility to reforms of its labour market, while the sheer size of the country's public debt made it an obvious target for nervous traders. The prospect of Greek voters rejecting austerity and the French electorate denying Nicolas Sarkozy a second term as president was also weighing on the markets.

The Greek government said it would hold a general election on 6 May, with opinion polls showing support for the mainstream pro-austerity parties is too weak to allow them to form a government.

"Spain is a big focus right now and even Greece will be coming back into the picture as it looks for another tranche of aid, so this eurozone debt tragedy is not going away, but seems to be getting worse," said Daniel Hwang, senior currency strategist at Forex.com in New York.

Interest rates on 10-year Spanish bonds hit 6% for the first time since January, when Europe's leaders were battling to agree a bailout deal for Greece and secure the future of the eurozone. Shares in Madrid dropped by almost 3% to hit their lowest level since March 2009.

In Italy, share prices slumped by 5% on rumours that the government was preparing to downgrade its growth forecasts, and trading in the shares of several of its banks was suspended after they fell sharply.

Shares were also much lower on Wall Street, where the fallout from Europe exacerbated fears that the US recovery is petering out. Disappointment at last week's unemployment figures had already been weighing heavily on investor confidence.

The markets closed in New York with Wall Street completing a fifth successive day of decline, with the Dow Jones having lost 213 points. In London, the FTSE 100 closed down 128 points, at 5,595.55. Oil prices also fell sharply amid concerns about the prospects for growth on both sides of the Atlantic and in Asia, with the price of a barrel of crude falling by more than $2.

In contrast, safe haven assets such as gold, the US dollar and bonds in the US, Germany and Britain were all in demand. "The market went up on a wave of liquidity-induced euphoria, and as usual overshot. Now the clever boys have decided to get out," said Charles Dumas of Lombard Street Research.

Europe's politicians had hoped that Greece's second bailout, and a battery of emergency measures unleashed by the European Central Bank, including its long-term "repo" operation, which offered cheap money to troubled banks, would draw a line under months of economic chaos. But Erik Britton, of City consultancy Fathom, said: "The LTRO [long term refinancing operation] and all those things, all it's done is bought a bit of time, but it hasn't addressed the structural problems, even slightly, even for Greece."

He predicted that the ECB could be forced to take fresh rescue measures in the next few weeks to prevent strains in Europe's banking sector from turning into a credit crunch, while in the longer term several more countries – including Spain and Italy – would eventually be forced to write off a proportion of their debts before the crisis is over.

You ain't seen nothing yet - this is still the pre game show.

When the SHTF Europe's post WW2 welfare state socialism will be a smoking wreck and most likely Western Europe will either be under far right or semi communist governments.

SevenSeventeen wrote:

most likely Western Europe will either be under far right or semi communist governments.

While mutants will overtake China and aliens invade South America.


SevenSeventeen, America's answer to Global_Village.

.

One must not speak ill wills of others only good. Europe is in the shitter good.

jeanv wrote:

SevenSeventeen wrote:

most likely Western Europe will either be under far right or semi communist governments.

While mutants will overtake China and aliens invade South America.


SevenSeventeen, America's answer to Global_Village.

.

Yawn, you can afford to be complacent about Euroland - you have the family used goat dealership back in Upper Volta to fall back on.

Bad news for Britain. Half of our trade is with Europe. At least our second biggest market , America, is growing and our industry is increasing trade with the BRIC countries. But until the Eurozone sorts out its debt, our growth is going to be sluggish for a few years at least.


Greece, Italy, Spain and Portugal and possibly Ireland need to be eased out of the Eurozone and either adopt their own currencies or a kind of lower tier Euro. To keep the club med countries in the Euro will keep those countries poor, despite massive transfers of money from hardcore Euro countries. It's also a massive and unnecessary drain of resources from the Northern economies. Get them out of the Euro and the whole of Europe will see an economic boom.

mikgof wrote:

Get them out of the Euro and the whole of Europe will see an economic boom.

LOLOLOL Union was supposed to be an economic boom.

PopsFrost wrote:

mikgof wrote:

Get them out of the Euro and the whole of Europe will see an economic boom.

LOLOLOL Union was supposed to be an economic boom.

It would have been if it had been an entirely economic Union. Unfortunately it became a political tool and they let countries into the Eurozone, whose economies couldn't match the original criteria for membership. They were allowed to cook the books.

Spain Is Headed For a Major Economic Crash


On June 1, 2009, Air France flight 447 crashed into the Atlantic Ocean, killing all 228 people aboard. The disaster was caused by human error. With the plane already in a stall, the pilots pointed the nose upward, which was the exact opposite of what the situation required. When recovered, the cockpit voice recorder revealed that, before they hit the water, the pilots knew that they were going to crash.

Spain pointed their tax rates up in a situation where they should have pointed them down. Thus far, the response from the financial markets amounts to, “She’s going in!”



www.forbes.com . . .

jeanv wrote:

While mutants will overtake China and aliens invade South America.


SevenSeventeen, America's answer to Global_Village.

You moron!

Aliens have already invaded north America.

thiers a ton of news and some comments i would like to add to the board
but I cant

a few that would probably drive jean v into an change the subject anglo posting frenzy


im done

instead heres a hottie


in some peoples eyes she may not be of legal age but thats just thier opinion .... which theyre no longer entitled to


www.fuckfrance.com . . .