It is spread alarm throughout Europe. Not only in Italy, the differential between XNUMX-year government bonds and the equivalent German Bund makes governments tremble. By consulting the values reported by Mts, the largest European platform for the wholesale of bonds, it is possible to draw up a ranking of the most significant values and trace a history of the events that have contributed to making the value of the various spreads soar.
Greece – 3.333 bp: Athens risks dragging Europe and the euro down with a public debt at 160% of GDP and a recession that is estimated to be ever more extensive (according to the latest Eurostat data, the Greek economy is expected to drop by 5,5 % this year). It was the first piece to fall into the domino of the eurozone debt crisis and has so far obtained 20,3 billion euros of the 110 established last year with the Troika (ECB, IMF and EU), in exchange for significant reductions in the public spending and structural reforms capable of leading to a balanced budget in 2015.
Portugal – 1.125bps: Lisbon received a few days ago a further tranche of aid from the IMF worth 2,9 billion euros: in total, with the Troika it was granted a bailout plan worth 78 billion euros. Prime Minister Pedro Passos Coelho has ensured that the deficit/GDP ratio in 2011 will drop to 4,5% (while the agreements provided for 5,9%). It is the signal that the austerity measures adopted by the Portuguese government – and considered by many to be the toughest since the fall of the dictatorship in 74 – are having positive effects. However, the country will remain in recession, with the economy down 2,2% this year and 1,8% next year.
Ireland – 679bp: The bailout plan calls for 85 billion euros, yet for the IMF it is not enough and the debt crisis is getting worse; so far it has received 13,1 billion euros. The first of the two main objectives for Dublin is the recapitalization of the banks, which have been suffering since 2009: the problems of the credit institutions have in fact fallen on the shoulders of the State which has decided to nationalize a large part of them. The former Celtic tiger's second priority is to reduce the deficit to 3% in 2015. Considering that Dublin holds the record in Europe with the highest deficit/GDP ratio (32%), many experts believe it is impossible to achieve the set goal. In addition, the Irish economy contracted by 1,9% in the third quarter, somewhat less than expected: it is the worst performer in Europe after Greece, and overall Dublin probably will not grow more than 0,7% this year.
Slovenia – 499bp: Ljubljana's entry into the euro in 2007 does not seem to have been a happy choice. Since then, the country's economy has worsened, unemployment has risen to 11,5% and public debt to 45,5% of GDP – up from only 2007% in 23. After rating agencies downgraded Slovenian sovereign debt, interest rates on government bonds jumped above 7%, further widening the spread with German Bunds.
Italy – 477bp: With a public debt that exceeds 120% of GDP, the main problem of our country is to find the right recipe to revive the economy. For 2011 an acquired growth of 0,5% is estimated and for 2012 a contraction of the GDP of more than one percentage point. The austerity of Monti's maneuver has the goal of putting together 34,9 billion euros in the three-year period 2012-2014 to achieve budget parity and begin to see the public debt retreat as early as 2013.
Spain – 343bp: The most alarming figure is certainly that of unemployment: over 20% for several months. The new prime minister Mariano Rajoy has declared that he will cut 16,5 billion euros in public spending in 2012. But on how and if the objectives set by Brussels for this year will be achieved – including a deficit of 6% of GDP, compared at 9% in 2010 – he hasn't said anything yet. In recent days, after the Treasury managed to place Bonos at lower rates than those seen in recent months, the spread has fallen significantly. On 18 November the Spanish differential was still above the Italian one.
Belgium – 244bp: Centre-left Prime Minister Elio di Rupo decided to cut 11 billion euros to reduce public debt (over 96% in 2010) and deficit to 2,6% in 2012 – 4,1% in 2010 Moody's downgraded Belgium's rating due to the worsening debt crisis and the risk of bankruptcy of the Dexia bank – the governments of Belgium, France and Luxembourg have in fact offered 90 billion euros of guarantees to cover the institution's loans.
Czech Republic – 171bp: The GDP has contracted in recent months but in 2011 Prague should still register a growth of 1,2%. What is frightening, apart from a devaluation of the crown of more than 4% against the US dollar in the last year, is a downturn in the economy due to a contagion from the European debt crisis. Although it has not yet been downgraded by the rating agencies, Fitch lowered its outlook from "positive" to "stable" a few days ago, precisely because it fears negative repercussions on the Czech economy from the difficult situation in the euro area.
France – 117bp: Even Paris has entered a recession: the GDP will be negative in the last quarter of 2011 and in the first of 2012 (respectively -0,2% and -0,1%). But the goal of reducing the deficit to 5,7% of GDP this year remains. However, the austerity plan devised by the Elysium was based on a growth forecast of 1% of GDP in 2012 – an estimate that some institutes have already denied. Much will depend on whether the government, despite the presidential elections in the spring, will be able to take decisive action.
