European Sovereign Crisis: Update on Recent Events
Nearly one month into the third quarter, the European sovereign crisis continues to weigh on markets, moving beyond Greece’s borders. Italian and Spanish bonds spreads spiked in the first week of the quarter, putting the core issues surrounding the monetary union in focus. The emergency summit of EU leaders held last week finally gave markets something to cheer about in what we see as progress to a short-term plan to avoid default in Greece. With countries like Italy in focus now, however, the stakes are much higher and the markets are telling us a much different story than what we have seen to this point.
Greater signs of contagion
With Greece, it is a question of solvency, dominated by the country’s large debt burden and its inability to roll over debt in the public markets. Investors do not believe the country has the means to support the amount of debt it carries. . .
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