Nogger's Blog

02/08/11 -- The euro has a shaky look about it again today with the latest injection of optimism following the latest Greek bailout already starting to wear off.

Moody's last week downgraded Cyprus, citing concerns about the size of it's banking industry (600% of GDP) and it's potential exposure to Greek debt.

Meanwhile Spain and Italy are waiting nervously in the wings. The ruling Spanish socialist party has thrown in the towel and called for an early election, now pencilled in for November. It isn't likely to be wanting to push any austerity measures through this side of that particular vote.

Indeed, as it is widely expected to lose, it probably isn't going to have to push any austerity measures through at all, the next lot in can sort that out.

It is worth considering at this point whether Spain and Italy are too large to let them fail, or too large to be bailed out. Spain's economy, which is the smaller of the two, is bigger than that of Ireland, Portugal and Greece put together - and you know how much trouble they had just trying to bailout each one of those on an individual basis.

Italy meanwhile has the highest debt to GDP ratio in the eurozone with the exception of Greece. Bond yields there have hit their highest in the euro's 11-year lifetime today, now running at the same level as those in Spain.

The day must come when Merkel and Sarkozy, or the Bank of Mum & Dad as I call them, says enough is enough we're not picking up the tab for your irresponsible excesses any more. But until then we'll just let the merry-go-round ride last a little while longer yet.

Now then, there's the mortgage to pay, the car to insure and the kids to be fed, but I really do NEED a holiday and an iPad...