Here is an update on the Euro crisis from Reuters.
“Europe may be months, conceivably weeks away from an expanded debt crisis that cuts more countries off from access to the markets and forces fresh emergency action by rich governments or the European Central Bank.
The many potential triggers for an expanded crisis include a failed bond auction, any signs that Athens or donor nations were backing away from a 110 billion euro ($141 billion) bailout of Greece, and a freezing up of Europe’s interbank money market.
For now, Portugal, Ireland and Spain, widely seen as the next possible “dominos” after Greece, remain in significantly better shape. The interbank market is far from grinding to a halt as it did after Lehman Brothers collapsed in late 2008.
But the spread of investor jitters in the past 24 hours, affecting markets as distant as yen swaps in Tokyo, suggests market conditions could deteriorate as rapidly as they did during the global financial crisis of 2007-2009.
“In my view there is a 10-20 percent chance that at least one more country will need rescuing as it finds itself shut out of the markets,” said Marco Annunziata, chief economist at Italy’s UniCredit bank.
“If it happens, it is most likely to happen in the coming six months.”
Lena Komileva, head of G7 market economics at money broker Tullett Prebon, said the crisis over Greece’s solvency had morphed into a capital markets crisis, and the markets had begun to feed on their own momentum.
“Another credit event similar to Greece can happen within weeks,” she said.
German Chancellor Angela Merkel and top economic policy makers in the euro zone appeared to recognize this in their warnings about the risk of an expanded crisis on Wednesday.
“It’s absolutely essential to contain the bushfire in Greece so that it will not become a forest fire and a threat to financial stability for the European Union and its economy as a whole,” said European Monetary Affairs Commissioner Olli Rehn.
TRIGGERS
Greece became unable to finance its debt at affordable rates when its 10-year government bond yield soared near 10 percent in April. The euro zone’s other weak countries have not reached that stage; Portugal’s yield was below 6 percent on Wednesday.
Portugal sold 500 million euros in six-month Treasury bills on Wednesday at a yield of 2.955 percent, which was about four times the rate at the last such sale on March 3 but was well below maximum levels in the secondary market. This was seen as a moderately positive sign by analysts.
Spain is expected to succeed in selling 2-3 billion euros of government bonds on Thursday, although at a much higher yield than in its last auction, analysts said.
Nevertheless, every debt sale by weak euro zone states in coming months is likely to be viewed as a potential flashpoint for an expanded crisis. Portugal plans to offer more T-bills on May 19 and Spain plans another bond sale on May 20.”
Read the full article here.
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