Predators pounce as politicians dither
With the very survival of the euro in doubt, Ireland's fiscal position is heading in a very Italian direction warns Marc Coleman
EDNA O'Brien was right: August is indeed a wicked month. Humid air saps the energy. Everywhere is shut. Our leaders are on holidays. And that is when financial markets can do their greatest damage.
Markets never sleep and just as they did in August 2008, last Thursday they smelt blood and pounced: as US politicians were infighting and euro area leaders were firefighting, worries about the ability of politicians on both sides of the Atlantic to control spiralling public spending drove Italian and Spanish interest rates to over six per cent.
At those levels governments and banks find it almost impossible to fund themselves and a vicious circle dynamic kicks in. By Thursday afternoon that dynamic caused stock markets to experience falls the kind of which we hoped we'd seen the back of. Billions have been wiped off pension funds and bank capital. More seriously, the stability of the global economy is in doubt.