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Spreading Eurozone Contagion

By       Message Stephen Lendman     Permalink
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Spreading Eurozone Contagion - by Stephen Lendman

Cratering Eurozone economies.

The operative word is contagion. It's malignant and spreading because it's unresolved and irresponsibly addressed. 

Germany, Europe's strongest economy, just had its worst ever bond auction since 1999. Over a third of 10-year bunds offered were unsold. More on the failure below.

Comparable Italian yields jumped to 7.3%. Italy's two-year bond hit 7.7%. The inverted curve signals tougher times ahead. Italy also sold six-month bills at 6.50%, its highest rate in 14 years.

Troubled Spain had to pay 5.11% for three-month money, the highest short-term rate since formation of Europe's Economic and Monetary Union (EMU) in 1999.

Other Eurozone rates also rose, including Portugal's after Fitch downgraded its debt to junk and retained a negative outlook. Hungary was downgraded to junk as well with a negative outlook. Yields there jumped close to 10%. Belgium's in trouble. So are France and Britain. Credit default swaps on European sovereign debt and banks reached all-time highs. 

Earlier in the week French bonds were hammered. Europe's debt crisis moved from periphery countries to core ones. Many believe the Eurozone can't survive, except perhaps with fewer stronger members.

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The European Investment Bank (the EU's financing institution) is also being pressured. Yields on its debt rose. So did European Financial Stability Facility (EFSF) bond rates. Yields on its 10-year maturities jumped from 3 3/8% to 3.88%, up from 2.68% two months ago.

In other words, not only are Eurozone countries being pressured, but institutions established to rescue them. Smart money's saying don't bet on Europe. Bet against it. Some say it also about America. Expect that chorus to grow.

Belgium's key business confidence measure was negative for three straight months. French consumer sentiment reached a two-year low.

Goldman Sachs' Manipulative Dirty Hands

Paul Craig Roberts blames major US banks for Germany's auction failure, including Goldman. At issue is their guarantee for $1 trillion or more of European sovereign debt through credit default swaps - "insurance against which they have not reserved."

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As a result, they're on the hook for any European sovereign debt failure. Big money's involved. "The reputation of the US financial system probably could not survive its default on the swaps it has issued."

Moreover, Obama doesn't want another major financial disaster in an election year. As a result, Washington "wants Germany out of the way of a European bailout."

Germany's "in the way of the power that the EU authorities wish to wield." They want Eurozone cohesion, "unity," and loss of member countries' sovereignty.

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I was born in 1934, am a retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

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