Thursday 22 March 2018

Eurozone crisis impacts on economic core as Germany fails to raise full €5bn

Donal O'Donovan

THE eurozone crisis is now affecting the region's core economy, with Germany failing to raise funds for a third time.

The German government failed to borrow the full €5bn it wanted to raise from a sale of two-year bonds yesterday.

It came as the yield, or interest Germany is paying to borrow over 10 years, hit more than 3pc at one stage yesterday -- the highest rate since May and up from 2.6pc at the end of November.

"Germany is already becoming liable for other countries' debt in fact, if not in name," said Elisabeth Afseth, a bond market analyst at Evolution Securities in London.

That implies that even without new formal arrangements the gap between Germany's cost of borrowing and the cost for peripheral European debt issuers will narrow.

Germany managed to sell just €4bn of the two-year bonds.

But analysts said Germany was not losing its appeal as a borrower.

"It doesn't have anything to do with German risk," said Padhraic Garvey of ING Bank. He said the deal struggled in part because it came so late in the year, with the markets very quiet.

As German yields hit 3pc, the yield on Irish 10-year bonds fell below 8pc for the first time since November 22.

It means the spread between the two narrowed to 5pc, from 6.5pc before the Irish bailout was agreed.

Irish Independent

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