Urgent measures to prevent further collapse of the markets

 

Markets and analysts were aware that the funds for the Spanish banks were not sufficient and "crushed" the Spanish and Italian bonds and the stock markets of the European region through sales. And this time, things are more serious as the euro was below $ 1.21, while oil had lost its upward trend with a dramatic drop by 4% to $88.

 

The stock markets in the South collapsed, with Madrid falling more than 5% and Milan following with 4%, while Athens found itself at crash limits, dropping by more than 7%.

 

The picture of the Spanish 10-year bonds was dramatic, since they reached interest rates of 7.52% and the Italian ones of 6.39%. At the same time the German bond rate was 1.14%, one of the lowest since the war. The Spanish 2-year bond broke the all-time record high with a spread at 660,34.

 

The deviations of the economies - What the problem is

 

The essence of the problem is that the German economy is ahead with a 3 to 3.5% wage increase, while at the same time wages in Greece have been cut even by 40%. Spain and Italy began reductions after the “freezing”. These large deviations cannot be reduced when Spain borrows at interest rates of above 7%.

 

Therefore an economy that loses its GDP cannot meet its targets, as has been the case with Greece over the last 2.5 years. Theoretically it needs an annual development of 5-6%, and certainly not interest rates at 7%. In simple words, revenues (in Spain and Greece shrinking from the high unemployment rate) minus the costs cannot pay their debts or to serve their interest. At the same time, the proposal for banking consolidation remains just that, as the Germans do not agree with forming a deposit guarantee scheme in Europe.

 

The recapitalization was announced, but ESM does not have the required funds, only 65 billion euros, while Spanish banks alone require 100 billion.

 

 

At the same time when Spain and Italy are challenged, Greece is the easy victim, abused primarily by the conservative Germans and their allies (Holland and Finland) who eagerly want our country out of the euro, but without having calculated the chain of consequences.

 

So while Greece and its ministers were silent, the Germans constantly brought back the issue of exiting the euro, one day before the meeting between the Troika representatives and the government.

 

And only the issue of stopping the acceptance of Greek government bonds by the ECB was enough to bring about the collapse. But the German statements accentuated it, sowing doubts about their purposes. Especially when analysts are confident that Italy and Ireland have more reasons than Greece to leave the euro, because the first two have an industry and staff that could cope with a national currency and restore competitiveness more quickly.