Europe is in trouble again.
Back in May the European Central Bank created a massive $1 Trillion bailout package for the countries on the fringe of Europe that were struggling with rising interest rates on their debts.
Despite the enormous bailout package, interest rates for the PIIGS countries just hit new records today.
Irish and Portuguese government bonds fell, pushing the yields on 10-year securities to records versus benchmark German bunds, on concern European banks are vulnerable to losses on their holdings of so-called peripheral euro-region debt.
Spain’s debt isn’t doing much better.
This is particularly depressing for Ireland since it has already enacted the draconian austerity measures that the financial markets demanded. In fact, all of the European nations in question have implemented austerity measures, and yet the financial markets continue to punish them.
Ireland and Portugal are the big losers for today, but Greece is still leading the pack towards self-destruction.
“Greece is insolvent,” Bosomworth, Munich-based head of portfolio management at Pimco, which oversees the world’s largest bond fund, said in a telephone interview today. “I see it as being quite a substantial risk that Greece eventually defaults or restructures.”
One Trillion dollars in bailouts and we are back where we started four months ago. Why is that?
The answer is surprisingly simple.