Greece is already starting to be frozen out of markets, with two of the world’s biggest trade insurers, Euler Hermes and Coface, saying yesterday that they will no longer offer protection to companies making new exports to the country, although they will honour existing contracts.
The increased uncertainty pushed Spain’s 10-year borrowing costs up 21 basis points (bp) to 6.656 per cent – perilously close to the seven per cent “danger zone” beyond which Ireland, Greece and Portugal needed bailouts.
Italy’s 10-year yields jumped 16.8bp to 5.934 per cent while Greece’s shot up another 64.5bp to 30.127 per cent.Stocks plunged as investors cleared out of all risky assets, driving the FTSE 100 down 1.74 per cent, the French CAC down 2.24 per cent, Italy’s FTSE MIB down 1.79 per cent and Spain’s IBEX 2.58 per cent.
Many investors moved into safe haven government bonds – Germany’s 10-year borrowing costs slid nine basis points to 1.27 per cent, the UK’s fell 13.1bp to 1.65 per cent and the US’ dropped 11.8bp to 1.63 per cent.To quote Elvis, "we can't go on together, with suspicious minds". Something's gonna happen - soon ...