Debt crisis in Europe

Ireland consecutive 10-year bond yields higher on day 8 to 7.7%, once again set the highest record since founding the euro, with Germany similar spread between yields is widened to a record high of 520 basis points, have greatly exceeded Greece to the European Union in April this year, the level before seeking help.

As expected the European Central Bank President Jean-Claude Trichet, the European Union summit agreed in principle to amend the "Lisbon Treaty" after the first trading week, the European bond market to make a violent reaction. Which is thought to be most affected by the treaty to modify the so-called European "periphery" countries and the Irish continued to surge in bond yields at record highs. At the same time, Portugal, Greece, Spain, borrowing costs have also showed different levels rise. Market analysts believe that Germany and France in the previous questions about the EU summit European Union countries to accept aid debt restructuring proposal to be considered much frightened investors, leading to the current unstable situation in Europe had to "edge" national bonds as the selling goals.

On Thursday, the Irish 10-year bond yields higher consecutive 8 days to 7.7%, once again set the highest record since founding the euro, with Germany similar spread between yields is widened to a record high of 520 basis points have been much higher than Greece to the European Union in April this year, the level before seeking help. While Ireland currently has cash reserves of 20 billion euros during the year can be no guarantee funding, but according to their national officials, these reserves can only last until mid-2011, Ireland will need to apply for international assistance is uncertain.

The face of continuously rising pressure on borrowing costs on Thursday night announced the Irish Finance Minister Lenihanti a scheduled before mid-deficit reduction announced by the road map in an attempt to reassure investors. According to the roadmap, the Irish government plans to increase by 60 billion euros next year, and tax savings, accounting for 3.6% of its GDP; in the next three years, plans to cut spending nine billion euros, the target budget deficit in 2014 in the proportion in the GDP from the current 12% to 3%. In fact, if the calculation of the cost of bank bailouts go, Ireland this year's deficit will reach 32% of GDP. Lenihan will also be published by 7th of next month its 2011 Budget. In a sense, the deficit reduction ahead of launch of the roadmap and the forthcoming Budget could convince investors that the Irish government have the ability to restore the national finances in order will decide whether to seek international assistance, the key factor.

Analysts believe that the end of the EU summit last weekend, the European bond market volatility this week, the main incentive. At the summit, leaders agreed to EU-27 will be the "Lisbon Treaty" to make some modifications, to develop a permanent mechanism for crisis resolution to replace the Greek creation of the debt crisis, temporary relief mechanism to strengthen economic governance, to prevent the sovereign the spread of the debt crisis and the budget approved by more stringent regulations, including sanctions against those who do not curb the deficit and national debt in order to improve the future new EU financial crisis response capacity. Which greatly touched investors nervous is German Chancellor Angela Merkel and French President Nicolas Sarkozy jointly by the proposition that aid in the establishment of a permanent mechanism, in the event of crisis, countries need debt relief and debt restructuring, such as bank , hedge fund that owns bonds with the private sector will also bear the risk. This means that holders of bonds of financial condition was poor countries may face greater risks than ever before, resulting in a number of investment institutions and individuals to Ireland and other countries eager to sell bonds. In fact, Jean-Claude Trichet last week warned as early as European leaders, said De Fati proposed assistance system may push up borrowing costs for some countries in Europe.