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Spain´s firewall gets challenged: risk premium hits new highs

Jose L. De Haro/ NYSE
25/06/2011 - 0:44
  • The idea that the Euro zone will break up underestimates the political will of the European leaders

The euro fell versus the majority of its 16 most-traded counterparts amid speculation a Greek austerity plan and a European Union pledge to stabilize the region´s economy won´t resolve its sovereign-debt crisis. Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co., talked to elEconomista about how Europe is handling with the Greek debt crisis, and its impact on Spain, where10-year yield increased five basis points to 5.68 percent.

Asked about whether Spain is immune to follow other peripheral countries as Greece, Portugal or Ireland, Chandler explained that, so far, "there´s been a firewall around Spain". For the global head of currency strategy at Brown Brothers Harriman & Co what happened in Portugal, Ireland and Greece has not affected to Spain so much but, in the recent weeks, as the regional governments reported bigger deficits, Spanish bond yield rise, "but is not a lot yet in movement, even they have hit highs for the year", he confirmed.

"That said if this kind of spiral continues we will see how the firewall gets challenge in Spain. That´s the big question for the markets. If Greece defaults, we will suspect Ireland and Portugal not far behind and that would be the catalyst that will push Spain towards the periphery and not closer to the strongest countries of the UE", Chandler said.

Since the start of the European Sovereign Debt crisis, several people have portrayed this even as the beginning of the end for the Euro zone and the euro, but Chandler considered this is not a real scenario. "A lot of people, specially here in Wall Street and Main Street in London, have that kind of attitude, but I think it shows a lack of appreciation of history in Europe", he explained.

The currency expert explained that, since the end of World War II, Europe has taken numerous measures of integration. "I think the advice that Benjamin Franklin gave the US when we were 13 colonies, hang together, and hang separately, could be applied here", he pointed out. "I don?t think the elite in Europe has an alternative, so the idea that the Euro zone will break up underestimates the political will of the European leaders to keep it together, even If it takes some intervention and some institutional reform".


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Prima de Riesgo
País Precio Puntos %
ESP 119,02 +1,15 +0,98%
FRA 28,53 +0,15 +0,54%
ITA 164,33 +0,44 +0,27%
GRE 503,37 -0,68 -0,13%
POR 241,40 -0,22 -0,09%

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