Photo: Bloomberg TV
Spain has become front-and-centre in Europe’s 2-year debt crisis, and Spanish 10-year bonds are again hovering close to 6 per cent.Nomura’s senior political analyst was on Bloomberg TV talking about Europe’s sovereign debt crisis. He said “the mantra in the markets” has always been that Spain and Italy are the real cause for concern, and that one of Spain’s biggest problems right now is meeting its deficit targets:
“As if things weren’t bad enough looking at Spain’s economy, we then of course get the complication this week of the Repsol affair which certainly hasn’t been helpful to the Spanish stock market. …The issue is this. Can Spain do what it needs to do on defect reduction without sinking itself into a deep and long recession which is what we’re really looking at in Europe at the moment. The real fear in markets is not that Spain is going to miss its deficit reduction numbers, but it’s going to hit them, and the consequences of that for the economy – civil unrest.”
Newton said euro scepticism is increasing in Northern European countries that don’t want to bail out the peripherals, and that he personally believes there is a risk that the Greeks could fall out of the eurozone and take some others with them. He did however add that he sees Europe staying together:
“I think the euro is here to stay. It’s going to struggle for the next few months, probably for the next couple of years because of the politics and because of austerity but when we look at the EUR-USD at $1.31, really not been below $1.25 in the last several months despite all the turmoil in Europe, markets are telling us something. Markets are telling us that despite the crisis they think the euro is here to stay.”
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