In a few hours markets in Asia will open and uncertainty over raising the debt ceiling. With unemployment at 9.2% in the US it can ill afford to have another shock to the financial system and bond markets.
After the euphoria last Thursday for a new bailout plan for Greece, worry and concern has return to the fiscal positions of Spain and Italy.
The yield or interest that has to be paid on Italian and Spanish bonds have increased and stand near the crucial 6% rate which is regarded as the boundary for sustainable debt.
Italy with its high dent to GDP ratio,ageing population and inefficient political system is viewed as having difficulty in long run dealing with its finances
Spain has high unemployment officially at 21% and suffer a massive crash after the real estate boom, which ended in 2008. With Spain’s difficult foreclosure process theer will be trouble in this sector for many more years, as the borrower is stil responsible for the loan even after losing the property.
The high unemployment and slow growth has led to doubts that Spain can mange its finances and maybe in line for a bailout eventually. Yield on 10 year Spanish bonds rose to 6.15%, while Italy’s nears the crucial 6% threshold at 5.93%. The euro and pound fell in trading today, and all the major European markets showed significant losses
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