As the confidence in Europe's sovereign nations' ability to pay off their debts weakens, the yields being paid on their government bonds is increasing greatly. Evidence of this is given by Spanish and Italian bonds paying the highest yields seen in the Eurozone since its inception over a decade ago. There has been a massive sell-off of italian stocks and bonds in recent days as the markets react to the news that italy is having trouble making ends meet as a nation. This is crippling Italy in the same way that Greece was crippled by its sovereign debt.
Looking further afield, most markets in the EU including the UK have lost a significant percentage of their value in recent days due to the lack of confidence the markets have in sovereign nations' ability to pay their debt bills. The FTSE has been losing roughly 1.6% daily for the past week and the news today that Lloyds bank (partly owned by the taxpaying UK public) has made significant losses too.
It seems that this is just the latest chapter in the economic down-turn that started in 2008. Despite all the calls from governments worldwide that the markets have been getting back to 'normality' and the economic picture had been recovering, there have been no "green shoots" of recovery. This latest sell-off of government bonds and the great panic in the markets is just evidence that there is no recovery. The financial world has changed and the governments and banks need to realise this and adapt to the changed circumstances.
