Investors are increasingly loath to trust the debt of many eurozone sovereigns. That is the most important lesson of recent events. Many European politicians wish to declare war on the markets. They need to remember that they want people to buy their debt.
As of Monday, spreads over German bunds were more than 60 basis points (0.6 percentage points) in Finland and the Netherlands, 152 points in Austria, 155 points in France, 292 points in Belgium, 466 points in Spain, 480 points in Italy, 650 points in Ireland, 945 points in Portugal and 2,554 in Greece. For most members, such spreads are manageable. Even Italy and Spain could live with current yields for a while, albeit not indefinitely. What is worrying is that stresses in eurozone public debt markets are rising: Ireland is the only member to have had a significant decline in spreads, though to what is still a penal level.
