This is what Italy’s bond yields look like after Greek referendum contagion

The Greek Prime Minister announced to most everyone’s surprise that he was to call a referendum on the bailout and austerity agreement hammered out in Brussels last week. According to Reuters, Mr Papandreou did not inform his finance minister about the referendum before announcing it. Nor is he believed to have informed other leaders in Europe. German and French leaders are to get together to discuss how to deal with this crushing blow to last week’s agreement.

In the wake of the Greek referendum announcement, all eyes are turning to other indebted countries within the euro zone. In Ireland, for example, David McWilliams writes that this is yet another golden opportunity missed for the Irish “renegotiate our odious bank bondholder debt”. Irish MP Stephen Donnelly agrees. He says ‘Ireland has no moral obligation to repay Anglo bond‘.

But the primary focus is in Italy. Ambrose Evans-Pritchard writes of worries about Italy, Europe, and Red Brigade terror. Italy’s labour minister Maurizio Sacconi is quoted as saying:

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We must stop creating tension over labour reform which could lead to a new wave of attacks. I am not afraid for myself because I have (armed) protection. I am afraid for the people who are not protected and could become a target of political violence that is not extinct in our country.

Bonds in Italy are marching higher amid rumours of ECB intervention. Yesterday they breached 6.15%. Now they are above 6.30% and going higher still. Belgium and Spain have also been infected with Greek referendum contagion.

(See the charts below)

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Italy 10-Year Yield
Italy 10-year yields today
Belgium 10-Year Yield
Spain 10-Year Yield

Source: Bloomberg

P.S. – Good thing for Prime Minister Papandreou that he was born in the US. That makes him a US citizen. If he needs to flee by helicopter, he knows where to go. And he always knows who can lend him a helicopter.

I was less concerned with Ireland and Portugal as they already have bailouts but Portugal didn’t have a yield move while Ireland did. Irelnad’s chart for today is below.

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3 Comments
  1. David Lazarus says

    Has there been an uptick in violence in Italy or is this a comment to try and keep the armed escorts in place. Austerity would make it much harder to justify why ministers should be exempt from cuts. The fact that many leaders need protection for life does mean that they have no regard for decisions that harm the lives of the majority of its population.

    The fact that the George Papandreou might actually need that helicopter is telling in of itself.

  2. Dave Holden says

    It’s a sorry state of affairs when even the faintest whiff of democracy sets the cat among the pigeons.

    1. Edward Harrison says

      Dave, I agree. This is a much more democratic route. The Greeks were about to sign up to debtor’s prison. They need to consent to doing so. If they do or don’t , they can only look at themselves and know they made the choice. In a matter of this importance, that is the right way to do it.

Comments are closed.

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