Eurozone weighs more powers for bailout fund (AP)

The technocratic governments in Italy and Greece are not off to a smooth start judging from the action in the bond market. A quick glance at the 10-Year note in Italy shows the yield is up 25 basis points to 6.70% and the Spanish 10-year note is up 24 basis points, soaring through the 6% mark to 6.09%.Meanwhile, Greek 1-year bonds are trading at a mere 250%. Any bets on when they exceed 300%?

Eurozone finance ministers say they are determined to stop the Greek debt crisis from spreading to larger economies such as Spain and Italy.

The devil lies in the detail of Cyprus’s salvation. The island nation’s rescue sets precedents for the eurozone that may stick in the memory of depositors and bondholders alike as investors debate who will next fall victim to the debt crisis. Under the terms of the agreement struck early this morning in Brussels, senior Cypriot bank bond holders will take losses and uninsured depositors will be largely wiped out.

France has encouraged Spain to apply for aid as soon as possible. In Germany, Wolfgang Schäuble wants anything but a timely application. Note that unless a country requests a bailout, and agrees to terms set by the IMF (something Spain does not want to do), the entire OMT plan of Draghi is useless. Finally, at the latest EU finance meeting on Saturday, battles between eurozone and non-eurozone countries erupted over the banking union.

Whether or not Greece stays in the Eurozone and for how long is still debatable, but Greek CDS contracts are set to trigger next month after Greek parliament retroactively inserts collective action clauses (CACs) forcing all debt-holders to participate in the next deal. Bear in mind that forced restructuring is the trigger, not the insertion of the CAC language itself. The Financial Times reports Greece sets date for €200bn debt swap

I must admit to having tuned out the Greek debt crisis a bit. It’s not that the effective bankruptcy of Greece no longer has implications for the world economy – the country could still be forced from Europe’s monetary union, with potentially destabilizing consequences. Nor has the suffering of the Greek people diminished. Unemployment has soared over 25%, and with more budget cutting to come, the economic prospects for the Greeks are unlikely to brighten anytime soon.