Bloomberg – Germany may be getting ready to give up on Greece, as measures in the credit markets signal growing concern about the smaller nation’s ability to repay investors.
Yields on Greek two-year notes rose 1.93 percentage points to 57 percent on Sept. 9, according to data compiled by Bloomberg. Credit-default swaps to insure the country’s five- year bonds and to speculate on government securities jumped 475 basis points to a record 3,500 basis points, according to CMA. The contracts are the highest in the world and more than three times the 1,134 basis points on Portugal’s debt.
After almost two years of fighting to contain the region’s debt crisis and providing the biggest share of three European bailouts, German Chancellor Angela Merkel is laying the groundwork for what markets say is almost a sure thing: a Greek default.
“It feels like Germany is preparing itself for a debt default,” Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London, said in an interview. “Fatigue is setting in. Germany could be a first mover or other countries could be preparing too.”
Officials in Merkel’s government are debating how to shore up German banks in the event that Greece fails to meet the budget-cutting terms of its aid package and is unable to get a bailout-loan payment, three coalition officials said Sept. 9. The move capped a week of escalating German threats that Greece won’t get the money unless it meets fiscal targets, and as investors raised bets on a default.
This is no secret! But is worthy of note. Three years of trying to save the Euro is giving way to the reality that the Euro is going to be impossible to save. In 2008, it was possible to bluff and tell people that the situation could be turned around. This time, no one’s going to fall for such nonsense.