James Saft is a Reuters columnist. The opinions expressed are his own.
Now it is Spain.
The message from markets is not so much that Italy is too big to fail but that Greece will fail and in doing so ensnare others.
The prospect of two new avowedly technocratic governments and fresh pledges and plans for austerity proved not enough to stem contagion in the euro zone, as the financing drought spread beyond Greece and Italy to Spain. Spanish 10-year bond yields climbed above 6 percent for the first time since early August when the European Central Bank waded into bond markets in Spain’s support.
Perhaps that is because the contagion isn’t coming from Athens or Rome but from governments in Berlin, Paris and the ECB in Frankfurt, all of which seem unwilling to take the needed steps to save the euro.
The era of good feeling following Silvio Berlusconi’s resignation and the appointment of former European Commissioner Mario Monti as premier-designate was, well, short. While Italian bond yields are well below the mid-7-percent levels of last week, they rose again on Monday to 6.67 percent and Italy was forced to pay a euro-era record to sell five-year bonds.
It didn’t stop there, with the costs to insure French and Belgian bonds against default also rising to a euro-era high.