{"id":2053,"date":"2012-06-20T08:27:59","date_gmt":"2012-06-20T07:27:59","guid":{"rendered":"https:\/\/blog.iese.edu\/martinezabascal\/?p=2053"},"modified":"2012-06-20T08:31:08","modified_gmt":"2012-06-20T07:31:08","slug":"turmoil-in-the-markets-answers-to-foreign-correspondents","status":"publish","type":"post","link":"https:\/\/blog.iese.edu\/martinezabascal\/2012\/06\/20\/turmoil-in-the-markets-answers-to-foreign-correspondents\/","title":{"rendered":"Turmoil in the markets. Answers to foreign correspondents"},"content":{"rendered":"

With the news that Spain\u00b4s risk premium today reached 550 points and bond yields are above 7%, we need some quick comments\/thoughts from you on this.<\/span><\/p>\n

\u00a0<\/span>Specifically:<\/span><\/p>\n

    \n
  1. Do these figures mean a sovereign bailout for Spain is needed?<\/span><\/li>\n
  2. Or do you think this is normal \u2013 i.e. the markets have acted in an exaggerated way to Moody\u00b4s downgrade, and will soon calm down<\/span><\/li>\n
  3. Everyone is now looking at Germany for a solution. Is this realistic? Can Germany – or even Brussels – really do anything?<\/span><\/li>\n
  4. What will be the consequences for Europe if a sovereign bailout of Spain happens?<\/span><\/li>\n<\/ol>\n

    ANSWERS<\/strong><\/p>\n

    Overall answer to the current turmoil in the debt markets<\/strong><\/p>\n

    They current turmoil in the debt markets is a consequence of three factors:<\/p>\n

    a)\u00a0\u00a0\u00a0 Lack of action or lack of detailed action by the European authorities.<\/p>\n

    b)\u00a0\u00a0\u00a0 Increased perception of risk (uncertainty) among investor that could produce over reaction, sometimes foolish.<\/p>\n

    c)\u00a0\u00a0\u00a0 Negative impact of sensationalist news, absent of data that influence the public and the markets.<\/p>\n

    Specific answers to the questions<\/strong><\/p>\n

    1.\u00a0\u00a0\u00a0 <\/strong>Do these figures mean a sovereign bailout for Spain is needed?<\/strong><\/span><\/p>\n