Financial Times
June 16, 2011
Pictures of riot police battling masked protesters do not help delicate diplomatic talks. As the Greek government wobbled and with no sign of a new rescue deal, no wonder spooked investors pushed Greek two-year bond yields above 30 per cent for the first time.
Rising worries about the knock-on impacts of a chaotic Greek default were bad enough. Then Ireland talked about defaulting on the unguaranteed debt of two of its failed banks.
As usual, Greece itself is too small to matter, as is Ireland. But the domino effect is raising Spain’s borrowing costs and that hurts the euro. Concerns about the continent’s banks are increasing too, another negative for the euro.
Still, the International Monetary Fund seems unbothered. It had warned it would not pay the next tranche of bail-out funds – needed by Greece to avoid default next month – unless Europe worked out how to fund the country next year. It now seems to be taking a softer line, happy to trust the eurozone to sort out its differences.
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