After the crisis of Dubai, which is still far from being resolved The spotlight has been 'claimed' by both countries in the Euro: Greece and Spain have suffered a 'downgrading' (derating) the creditworthiness of the now infamous by rating agencies. If
for Spain it was just a credit watch negative (ie a kind of 'special observation') caused by the fear that the economic crisis persists more long as in other European countries, Greece has been a real drop in ratings from A-to BBB by Fitch reasoned with the worrying situation of the Hellenic Public Debt which is approximately 12% of GDP .
Greece and Spain, along with Italy and Portugal, since the beginning of the economic crisis have been brought together in so-called PIGS countries, wanting to show us the even the acronym and the European Union, whose financial position is the worst quality than the rich countries of the euro.
To see how financial markets interpret the current economic situation in these four countries have decided to compare the performance prices of government issues with what is regarded in Europe, the risk-free investment: the German Bund. To do this I chose five bonds as fairly homogeneous coupon (between 4.25 and 4.75) and a deadline (June-August 2014).
is the trend of the reference.
Germany 2014, coupon 4.25%, 2.23% yield
As you can see the price of the German bund is located at the maximum period after falling by about one percentage point over the month of October.
quite similar trend for the Italian BTP albeit with a more marked deterioration starting in December:
Italy in 2014, 4.25% coupon, yield 2.71%
Slightly different trends in government issues in Portugal and Spain where prices after fluctuated within a fairly wide range (0.75 bps) showed a rather sudden drop in recent sessions, indicating a growing nervousness among investors.
Portugal 2014, 4.375% coupon, yield 2.77%
Spain 2014, coupon 4.75%, 2.58% yield
However, yields on three titles are the same sign that the market 'perceived' level of risk similar to Italy, Portugal and Spain.
different matter with regard to Greece: The performance of the stock (with the simultaneous increase in yields) clearly indicates that the market considers it possible, in practical terms, the existence of a default risk of the country
Greece 2014 , 4.5% coupon, yield 4.36%
The problem is to assess, beyond the critical situation of public finances, since the default risk is real or not because it would lead to the insolvency a state of weakness and uncertainty in all markets in the Eurozone with special financial and economic consequences that could result in a period of weakness in the single currency, as indeed, is beginning to be reported by the strengthening of the dollar:
Although we can not exclude the possibility of default regardless of a sovereign state to believe that Greece is unlikely to repeat what happened in Russia in 1998 and Argentina in 2001.
the European Union can hardly tolerate a further escalation of the crisis that would preclude scenarios already seen in 1992 when financial speculation led to the devaluation exit of the pound and the lira from the EMS for the simple reason that there is, by regulations, the possibility of leaving the euro: it follows that, were to drag on the state of Greece's difficulties, you may ultimately own the 'EU to acknowledge, albeit informal, of the solvency of the Hellenic Republic.
as a result we could see a stage, even prolonged weakness of the euro would encourage investment in other currencies.
