The End of Sovereigns

Global capital markets have breathed a sigh of relief with the European Central Bank's announced support of the European Union, U.S. fiscal and monetary authorities, and the International Monetary Fund. Equities are rising as capital flows away from U.S. and German government debt. Sovereign yields in Italy, France and Spain have declined precipitously, while German yields have risen. This reflects optimism by traders that Europe will avoid a wave of defaults and contagion.

All this comes despite Standard and Poor's threat of downgrades to the creditworthiness of 15 EU members, including Germany, which would also cause the bailout fund, the European Financial Stability Facility (EFSF), to be downgraded. A downgrade of the sovereigns and the EFSF would almost certainly prevent the EFSF, a key portion of the bailout, from being funded and possibly from being completed. That would indicate the crisis is moving closer....587 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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