BRUSSELS — Throughout Europe’s debt crisis, northern European leaders have often said they will not stand for taxpayers having to fork out for other countries’ problems, and the notion of “taxpayer-funded bailouts” has taken root.
Yet despite three-and-a-half years of debt and banking turmoil, with bailouts totalling more than 400 billion euros, northern eurozone taxpayers have not actually lost a cent.
By Daryl Montgomery: Global interest rates continue to diverge, with rates rising in the troubled eurozone countries and falling to new lows in Germany and the United States. The same sort of divergence took place during the 2008 Credit Crisis with yields on safe-haven governments falling markedly, while yields on low-grade corporates soared.
One week back, the U.S. Treasury Department announced it would start auctioning off two-year floating rate notes – either later this year or early next year. The news marked the first new financing product from the U.S. government in more than 15 years since TIPS or Treasury Inflation-Protected Securities were introduced in 1997.
Public debt levels are rocketing in almost every country of the eurozone periphery. Debt ratios are already crossing the point of no return in Portugal and Italy and are nearing the danger zone in Ireland.
The latest figures from Eurostat are shocking even to those who never believed that combined fiscal and monetary contraction – made worse by bank curbs – could have any other result than a faster rise in debt trajectories.
Put it down to market conditions, given that the same company offered investors the same security with the only difference being the two deals were separated by a gap of 14 months.
As a result, a fixed rate reset preferred share financing done by Manulife Financial in August 2014 was a much easier sell than a similar offering completed in June 2013.
The euro has risen almost 2% against the US dollar thus far this year, while the yen has fallen about 4.5% against the greenback. Beneath this divergence may be a common consideration: Interest rate developments.