Greek to German spreads widen as Old Man Europe shows they are still as sick as ever

We reported last month on how giddy, investors in Greek paper had become when spreads came down.  I am no chartist, but I saw this same pattern with Credit Default Swaps during the credit cruch.  CDS would spike way up, only to come down just as quickly.   Investors got giddy when they saw things come down, but the underlying fundamentals have never changed. 

The spreads on Greek debt to German is as high as it was before all the intervention.  The Greek gov't still can't roll over any of their debt at current market yields and remain solvent.

It is clear that their financing is going to be permanent or if Europe will find a way to "restructure" their debt, by offering up some kind of guarantee. 

Greek is small enough so it could work, but the moral hazard will threaten the monetary and fiscal union that is the EU.  Portugal, Ireland, Spain and Italy will wonder, why the need for austerity if I can get bailed out? 

Source Bloomberg

A measure of Sovereign Risk

Spanish to German Spreads - 230 bps
Portugal to German Spreads - 505 bps
Irish to German Spreads - 680 bps
Greek to German Spreads - 886 bps

And from the Economist:


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