The political stalemate in Belgium has crossed the 400 day window, with no real fresh movement. It appears that no government, is a form of government.
The market, which had been calm about the whole issue, has started to price is higher levels of risk in Belgium sovereign debt. The issues in Belgium are such that the nation could be the first in Europe to split into sub nations since Yugoslavia.
The core of Europe is now squarely in the sights of the bond vigilantes, as the cost of rolling over debt, let alone issuing new debt increases for everyone. The end game approaches faster then the media appears to understand.
- Spain is in need of an economic stimulus package with a debt funding bailout.
- Italy needs help servicing its giant pile of debt, as its ability to roll debt comes into question.
- Belgium with out a government is now seeing its debt costs rise.
- French debt as a spread verses Bunds, is now rising to historic levels.
The global market is pricing risk differently today, then it has historically. Or said differently, Europe is in a lot worse shape then we realize.
This became noticeable when South American nations like Columbia started to have a lower CDS cost then the “AAA” nations in Europe. The market is realistically discounting the EU chances of surviving this period, as is.
The obvious reality is still being denied by the above same groups. That is, Europe is doomed structurally, and the longer they try to band aid it, the longer it will take to fix, once they start to move forward.
It will be interesting to see how much longer the powers that be, can ignore debt contagion in their core nations. Its arrived, now what?