Italy, Spain and France continue to bring home not very reassuring numbers. Since November 9, the differential of the 3 countries has continued to grow: the Italian spread fluctuates around 500 points, the French one is over 150 bps and the Spanish one over 400 points.
November 18, 2010 – Just a year ago the spread between our government bonds and German ones was 158 basis points. And we were already worried. At the time, the blame was placed on the sub-prime crisis which still had negative repercussions on the US economy, which could drag the weaker European countries along with them. Spain was traveling around 200 bps and was starting to take the first hits after the great economic boom that lasted until 2008. But these spreads already seemed too high.
August 2011 – Yet they are nothing compared to the figures recorded in July and August of this year: a few days before August 88th the spread between French oats and German bunds shot up to 4bps, more than doubling what it had always been its average value since entry into the euro. On 400 August, the spread between the bonos and the bund had nearly reached 398 (with its historical record at 415 bps) and the following day Italy had overtaken Spain, reaching XNUMX bps during the day. The Italians felt strong that they owned a large part of their debt, confident that with the right reforms speculation would not have affected them, because their economy was based on solid foundations.
September 2011 – After the surges recorded in August, the European Central Bank decided to buy btps and bonos on the secondary market and this move allowed the two countries to experience a relatively calm September, with ups and downs. However, the Italian spread maintained an upward trend and already on 21 September it was again close to 400 bps at 398 basis points.
October 2011 – Then Greece's problems started to get worse. And French banks, which together with German banks are the most exposed to Greek debt, have begun to falter. Indeed, it was on 18 October that the spread between French and German government bonds exceeded the psychological threshold of 100bp (it has managed to fall below 100bps only once since then). The decision by the Moody's rating agency to put the company under observation triggered the hurricane triple A French.
November 2011 – In Italy the situation started to worsen on 31 October. The btp-bund spread went beyond the 400 bp threshold and in 2 weeks the differential increased by over 100 basis points. On Nov. 15, it closed at 528 (after hitting 552 six days earlier). Also for this reason, former premier Silvio Berlusconi has decided to resign. If we can talk about a Monti effect, we can do it starting today. With the programmatic speech in which he presented the reforms he intends to implement the spread fell back below the 500 level (to 492bp), after having touched 537bp in the morning, but then closed at 523bp.
The fate of our transalpine neighbor seems closely linked to that of Italy and the two spreads today followed the same trend. After hitting his all-time record of 204 basis points at 11.30 and risking not being able to place all the government bonds in theit this morning, it closed at 176 bps. In these days there is discussion about the solvency of the French state whose public finances do not show reassuring data. The target for the 2011 deficit is 5,7%, but many doubt that it will drop to less than 3% by 2013 as promised by Sarkozy. In addition it weighs on the Elysium the Greek default risk. If this scenario were to occur, it would be a very hard blow for the transalpine banks and the country would suffer, whether it was the credit institutions paying or the state deciding to intervene to alleviate the damage.
The case of Spain is different. Uncertain days lie ahead in the Iberian country due to the presidential elections on Sunday 20 November. Today the Treasury of Madrid has placed just over 3,5 million euros of 10-year bonds at an interest rate of 7,088%: a level not seen since before the introduction of the euro. And the spread was affected by it, which came close to 500, stopping at 499, but then fell again and closed at 459bp as yesterday. It will be seen from next week whether the new prime minister will be able to give adequate answers for the country's growth. In the meantime, however, there are concerns about unemployment over 20%, a stagnant GDP (+0,0% in the last quarter) and the target of a deficit of 6% of GDP at the end of 2011 which the main national institutes do not take for granted .
