Heart of darkness – entering the Eurozone’s end game

The eurozone crisis is moving beyond “spendthrift” countries in need of rescue, to the rescuers themselves. AAP

Early this week, sovereign bonds spreads for France and other Euro-core countries peaked.

Around noon on Tuesday the spreads on French and Austrian 10-year government bonds exceeded the German bund rate by some 1.9 percentage points.

This was higher than the spread for Italian bonds in July 2011. It goes almost without saying that the spreads for the southern countries, in particular Spain (4.57%) and Italy (5.32%), soared despite the fact that (according to market participants) the ECB intervened and bought Spanish and Italian government bonds.

Will the ECB start to buy Belgium, Austrian, and French bonds any time soon?

Politicians and analysts who still think that the crisis is just caused by some spendthrift countries at the European periphery and that it can be solved by imposing austerity programs on the sinners should take note: the crisis has arrived in the heart of Europe. And eventually the rescuers will themselves have to be rescued.

Italy’s new technocrat leader, Mario Monti. AAP