Europe's third and fourth biggest economies are in such a "weakened state" that the rates currently being charged by the alarmed bondmarkets are "unmanageable", the economists argued. Without "urgent action", included heavy buying of sovereign bond by the European Central Bank, both countries could need a Greek-style international bail-out or may even have to quit the euro, they said. "The European Central Bank will need to buy more government bonds, and we cannot rule out further liquidity injections into the banking sector," the Moody's economists said. "In the medium term, changes will be needed in the design, and possibly the membership, of the single-currency union." Citigroup backed the view, warning that Spain will need a bail-out by the EU, ECB and International Monetary Fund within months. "Spain will need to enter some form of a Troika program" some time this year, Citi's economists said in a note. The warnings in the report rattled traders across Europe. Spain's Ibex dropped 2.42pc, after a 4pc decline on Tuesday, plunging below the 7,000 level for the first time in three years. Italy's MIB fell 2.01pc; France's CAC fell 2.05pc; and Germany's DAX fell 0.9pc. In London, the FTSE 100 held firm.
You Might Also Like :
0 comments:
Post a Comment