Euro crisis ensnares Spain

Thursday was just another day in capital markets as Royal Bank of Canada posted results for 2012, causing barely a stir outside the tightly knit community of analysts and fund managers that follow the company. But here’s the thing: It was the biggest annual profit not only for RBC but also for any Canadian company — ever. For the 12 months ended Oct 31, the country’s biggest bank by assets posted income of $7.5-billion, up $1.1-billion, or 17%, from the previous year. That works out to $220.58 for every man, woman and child in the country.

Everyone thought 2012 was the year the euro crisis subsided. The ECB finally stepped up to the plate, bringing government borrowing costs in Spain and Italy down from unsustainable levels. Meanwhile, Greece avoided an exit from the euro.

German Chancellor Angela Merkel said banks must be allowed to fail if they run up unsustainable losses because her government can’t afford to rescue them a second time after the 2008 financial crisis.

By Robert Guttmann, Professor of Economics at Hofstra University and a visiting Professor at University of Paris, Nord. Cross posted from Triple Crisis

By Carnegie Endowment: By Uri Dadush, Zaahira Wyne Italian and Spanish government bond spreads continue to be high and volatile but have declined sharply compared to the levels reached four months ago. The eurozone is back from the brink of disaster; even so, the fiscal difficulties of Europe’s periphery—dangerous as they are—are only a symptom and not the cause of the crisis.

The euro tumbled more than two cents against the dollar as Italian government borrowing costs accelerated toward unsustainable levels, cranking up the euro zone's debt crisis by several notches.