Thursday, 3 November 2011

Political economy of eurozone crisis

This is just a short look at how the bond markets reacted on political negotiations and meetings over the eurozone crisis (inspired by the latest reaction on the markets after the call for referendum by the Greek PM, Mr Papandreou):

The Economist brings this interesting graph:

For the full text in the Economist click here.

Observe how the Greek yields in particular reacted to positive or negative reinforcements coming from the politicians. It's not proof but it's a good indication of how markets react to political decisions. For Italy, however, the yield was mostly depended on the ECB buying its bonds earlier this year, but now, after the latest referendum call, even the ECB's actions remained without effect.

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