Financial Times
July 22, 2011
Jitters returned to European markets on Friday, snuffing out an earlier relief rally inspired by the European Union deal on a second Greek bail-out.
Yields on Greece’s two-year bonds experienced their biggest single day fall since the country joined the euro in 2001, as investors shrugged off a warning by Fitch, the rating agency, that Greece risked becoming the first western nation to default in 60 years.
But in other markets closely watched for signs of contagion, rallies petered out. Italian and Spanish bond yields rose and the euro dropped against the dollar.
“The trouble with all this is that the crisis will only be on its way to full resolution when it becomes clear the eurozone, and in particular the periphery have achieved satisfactory growth rates,” said Andreas Utermann, chief investment officer at RCM, the equity fund manager owned by Allianz.
Other investors criticised the failure to put in place a proper firewall between Greece, Ireland and Portugal, which have all received bail-out deals, and Italy and Spain, which have been the focus of nervousness in recent weeks.
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