Europe’s ‘Doom-Loop’ Returns as Credit Markets Seize Up
‘We all know that QE2 is not really going to work but the market says “I’m a smoker, I know it kills me, but so long as I can get cigarettes, I’m happy”‘
by Ambrose Evans-Pritchard
Telegraph.co.uk
Credit stress in the European banking system has suddenly turned virulent and begun spreading to Italian, Spanish and Portuguese government debt, reviving fears of the sovereign “doom-loop” that ravaged the region four years ago.
“People are scared. This is very close to a potentially self-fulfilling credit crisis,” said Antonio Guglielmi, head of European banking research at Italy’s Mediobanca.
“We have a major dislocation in the credit markets. Liquidity is totally drained and it is very difficult to exit trades. You can’t find a buyer,” he said.
The perverse result is that investors are “shorting” the equity of bank stocks in order to hedge their positions, making matters worse.
Continue Reading at Telegraph.co.uk…
Source: http://financialsurvivalnetwork.com/2016/02/europes-doom-loop-returns-as-credit-markets-seize-up/?utm_source=rss&utm_medium=rss&utm_campaign=europes-doom-loop-returns-as-credit-markets-seize-up
