The meltdown rages on

Spain Pays More Than Greece to Borrow in First T-Bill Sale Since Election

Bloomberg,

22 November, 2011

Spain paid more than Greece and Portugal to sell three-month bills as the newly elected People’s Party called for a European agreement to “save” the nation’s debt, saying the country can’t afford 7 percent interest rates.

Spain’s three-month borrowing costs doubled as it sold bills at an average yield of 5.11 percent, more than twice the rate at the previous auction a month ago. The Treasury paid more than the 4.63 percent for 13-week bills sold Nov. 15 by Greece, which received a European Union-led bailout last year. Portugal paid 4.895 percent on three-month bills the following day.

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France, Germany to press euro zone treaty change

(Reuters) - French President Nicholas Sarkozy has embraced a German campaign for treaty change that could give European authorities intrusive powers to intervene in the national budgets of countries sharing the euro currency.

France and Germany will soon propose amendments to the European Union treaty in response to the bloc's sovereign debt crisis, Sarkozy said on Tuesday.

"With (Chancellor Angela) Merkel, we will soon make proposals on modifying the treaties to prevent countries from diverging in the budgetary, economic and fiscal areas," he told an Asian forum in Paris.

"We will do everything not just to defend Europe but also to consolidate it."

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Spanish yields spike as crisis exits blocked 

Economic Times, 

22 November, 2011

MADRID/BERLIN: 

Spain's short-term borrowing costs hit a 14-year high on Tuesday as political uncertainty over a solution to the euro zone's sovereign debt crisis hit another vulnerable southern European economy. 

European Union paymaster Germany continues to block the two most widely-touted exit routes from a deepening crisis that is shaking the world economy -- massive European Central Bank intervention to buy government bonds, or joint issuance of euro zone debt. 

Influential ECB policymaker Jens Weidmann, head of Germany's Bundesbank, spelled out his rejection of the former in a speech to employers in Berlin. 

"(The ECB) would overstretch its mandate and call into question the legitimacy of its independence by accepting a role of lender of last resort for highly indebted member states," Weidmann said. 

"Whoever believes that the current crisis can be overcome by giving up crucial principles of stability orientation, pushing current legislation aside, is wrong," he said, adding he did not believe either Spain or Italy would need financial rescues. 

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France’s AAA Status in Tatters as Yields Surge

Bloomberg,

22 November, 2011

Investors aren’t waiting for Standard & Poor’s or Moody’s Investors Service to strip France, Europe’s second-biggest economy, of its top credit rating.

The extra yield demanded to lend to AAA rated France for 10 years was 158 basis points more than the German rate at 11:51 a.m. today. The gap was 200 basis points on Nov. 17, the widest spread since 1990, up from 28 in April. The French 10-year yield was at 3.5 percent, about midway between top-rated Holland and Belgium, which is graded one level lower at Aa1 by Moody’s. French borrowing costs are more than a percentage point above the AAA rated U.K.

“France isn’t trading like a AAA,” said Bill Blain, a strategist at Newedge Group in London, who recommends buying U.K. government debt. “The market has made its judgment already.”

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Greek PM hopeful on signature dispute, strike looms

Reuters,

22 November, 2011

Greece's new technocrat prime minister said on Tuesday he was confident fractious politicians would soon provide a written commitment to painful austerity measures as demanded by the EU that will unlock funds needed to stave off bankruptcy.

But as Lucas Papademos tried to reassure EU officials in Luxembourg, the conservative New Democracy party reiterated its refusal to sign any pledge and Greece's main private and public sector trade unions called a 24-hour strike for December 1.

It will be the first major strike since Papademos, a former vice president of the European Central Bank, formed his three-party coalition to secure payment of an 8 billion euro aid tranche to avert default in December.

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