Despite a parade of downgrades from Standard & Poors late last week, government bond rates continue to fall across Europe. Check out the sharp decline in yields for the too-big-to-bail countries of Italy and Spain:
But is this just another temporary improvement, or will bond rates finally cool off for good this time? What, if anything, will it take for bond rates to fall back below the 5% level in Italy seen in the first half of last year?
In my opinion, austerity alone isn’t enough – there must be economic growth too. Unfortunately I don’t see much hope there.
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