The Five Little PIIGS

By Econ70 | 11/30/2011
A green background with the words " phelps and lau."

In October ’08 European banks looked pretty healthy; they held few toxic US mortgage backed securities. But, this strength was a fiction. European banks met their Waterloo in large holdings of euro-denominated sovereign debt of the PIIGS (Portugal, Ireland, Italy, Greece and Spain). The banks assumed that Germany, France, and other strong European economies would…

Read More

Italy is Next!

By Econ70 | 11/01/2011
A man in a suit and bow tie smiling for the camera.

Greek PM Papandreou’s call for a referendum to approve additional financing has heightened fears that Greece will default. In response 10-yr Italian debt yields hit 6.33% a euro-era high and as much as 4.55% above super safe German bonds. Once the spread exceeds 4.5%, clearing houses can force investors who use Italian debt as collateral…

Read More