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12 November 2010

Il Sole: The ghost of restructuring weighs on Ireland’s, Spain’s and Portugal’s debt, while Italy pays for the political crisis


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The governor of Irish central bank, Patrick Honohan, declared that the IMF "is always ready", thus admitting the possible IMF intervention.


"Until now it has been Germany to play the role of the tough one," said Christine Lagarde earlier this week. „All the investors should carry the burden of losses and gains in every situation.“ This means that France is ready to join Germany in its tough position with respect to the government bond of the states that are on the „periphery“ of Europe, and is also ready to involve banks in the possible restructuring of risky sovereign debts.

The interest rate differential for the 10 year bonds between Germany and Ireland is historically high, at 663 base points. The spreads of Portugal and Greece are also quite high – 485 and 930 base points, respectively. The same goes for the credit default swaps of Spain, Portugal and Ireland. The Italian spreads are at 182 base points – the highest level since the creation of the euro, caused mostly by the absence of the budget for 2011.
 


 


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