The prospect of a eurozone breakup intensified on Tuesday night as borrowing costs around the region soared and the Dutch prime minister said it should be possible to expel some members from the currency union.
Investors are rapidly losing hope that a solution to the sovereign debt crisis will be found, and their fear was demonstrated by rising bond yields – the rate of interest governments have to pay to borrow – across almost all single-currency countries. The Dutch premier, Mark Rutte, stoked fears that a collapse could become a reality as he aired the prospect of countries being ejected, albeit as a last resort.
"We would like countries to be able to be pushed out of the eurozone," Rutte said on a visit to London, adding member countries must "put out the fire" of the debt crisis. As analysts warned of "terror taking hold", even some of those countries until now regarded as safe havens, such as the Netherlands, came under pressure as fears about countries' creditworthiness spread from peripheral countries such as Greece into Europe's core.
One bond expert described this as the most worrying day yet in the crisis. Mike Riddell, manager of M&G's international sovereign bond fund, said France was now suffering a "full-blown run" on its debt, with investors dumping French bonds to move their money to safer havens. Riddell added that the credit default swap (CDS) market – where investors in effect bet on the prospects of countries going bust – now indicates that the chance of France losing its coveted top AAA rating is a near certainty.
"Even the Netherlands, which the market perceives to be the second strongest eurozone sovereign, is coming under a bit of pressure," he said. » | Katie Allen | Tuesday, November 15, 2011
