November 12, 2010
Its all getting very serious now to my eyes. This story from CNN via the FT, suggests that debt markets are pricing in debt defaults in Greece, Italy and Portugal.
The FT has been saying for weeks that Greece will default – it is a matter of when, not if – and it seems that markets are coming to believe them. Financialguy very much doubts that it will matter what the Commission or EU politicians say about this. Banking, finance and lending in particular are based on confidence. Without that, any house of cards (with lending involved) can collapse.
Do these countries have any short-term borrowing? If they do, they are potentially vulnerable when it comes time to roll the loan over. And, as we saw in the banking crisis of 2008, it won’t make much difference what politicians want if the amounts are large enough.
Plus, the potential political solutions would not come into effect until 2013. That could be very, very late. As was seen (again) in 2008, if confidence is lost, a weekend may be a long time!
As I write this, it is Friday afternoon. Lets hope that all is still well on Monday…financialguy