Is the US losing patience with the eurozone debacle?

On Thursday, the Spanish government’s borrowing costs came within a whisker of their euro-era high. Madrid’s 10-year bond yield jumped back above 7pc in a poorly covered €3bn (£2.3bn) auction.

Trying to minimise its immediate financing costs, Spain has recently skewed its debt sales towards short-term instruments. Ominously, though, yields are soaring even on two-year debt. Sovereign bonds for 2014 repayment were sold last week only at a huge 5.204pc yield, with Madrid now paying a fifth more for short-term money than it was six weeks ago. Even at these sky-high rates, the two-year auction was also poorly covered.

While seemingly arcane, these developments are extremely alarming. The market is now very seriously questioning the fiscal viability of the eurozone’s fourth-largest economy. Spain, there can be no question, is now teetering on the brink of a full-scale sovereign bail-out. This is despite eurozone finance ministers unanimously approving last week a €100bn bail-out of Spain’s rancid banks. Yields soared anyway, European equities tanked and the euro hit a two-year low.

For all the summitry, investors clearly don’t believe that current measures are enough to “save the eurozone”. Only unashamed bond-buying by the European Central Bank, the argument goes – hoovering up a litany of sovereign and private junk, to be inflated away – can buy the eurocrats more time.

Yet the chances of that happening remain remote. The “eurozone solvents” won’t allow it – Germany chief among them. So, the bank-sovereign doom loop draws tighter, and borrowing costs spiral. While Europe could probably rescue Spain, just, Italy is simply too big. It is worrying, then, that Rome’s 10-year bond yield also climbed sharply on Thursday, peaking above 6pc.

Read more: http://www.telegraph.co.uk/finance/comment/liamhalligan/9417866/Is-the-US-losing-patience-with-the-eurozone-debacle.html