Chart of the Day: Greek Crisis

Also via the BBC:

Greece's problems have made investors nervous, which has made it more expensive for other European countries such as Portugal to borrow money.

FILED UNDER: Europe, Quick Takes, World Politics
Steven L. Taylor
About Steven L. Taylor
Steven L. Taylor is a Professor of Political Science and a College of Arts and Sciences Dean. His main areas of expertise include parties, elections, and the institutional design of democracies. His most recent book is the co-authored A Different Democracy: American Government in a 31-Country Perspective. He earned his Ph.D. from the University of Texas and his BA from the University of California, Irvine. He has been blogging since 2003 (originally at the now defunct Poliblog). Follow Steven on Twitter

Comments

  1. Fausta says:

    Whoa!

  2. @Fausta: Indeed.

  3. Gold Star for Robot Boy says:

    For comparison’s sake, where does the U.S. stand?

  4. Gold Star for Robot Boy says:

    @Steven L. Taylor: 1.99&, which means we’re in better shape than the best-off European country. And I should be listening to GOP doomsayers why?

  5. What this chart really says is that no one lending money to Greece for 10 years actually expects the principle to be repayed. The interest rate is being set to recover most of the principle long before then, because they’re going to default in a few years.

  6. John Burgess says:

    @Gold Star for Robot Boy: Possibly because too low a rate means that would-be investors don’t invest. Instead, they go where their investment will give them a better return, which in this case isn’t the US and therefore will not create US jobs.

  7. Gold Star for Robot Boy says:

    @John Burgess: Then a little inflation would be a good thing, no?

  8. @John Burgess: Well actually, this is not the case as I understand it. Instead, US treasuries are considered a very save place to park money. In this case the higher rates are indicative of huge risk–i.e., the only way for Greece to attract lenders is to promise huge returns.

    In the current climate the lower rates are positive indicators of the way the market views long-term stability: low risk means low rewards (but guarantee ones).

    Again, this is as understand it.

    I know for a fact that the Greek number is a serious problem. It certainly isn’t indicative that the market foresees massive growth in the Greek economy!

  9. Ben Wolf says:

    The bond markets know U.S. bonds are risk-free because the government is sovereign in its currency and cannot involuntarily default, but ultimately the Fed determines yields. There is no possibility of interest rates spiking as they have in some eurozone countries.

  10. James Joyner says:

    @John Burgess: @Steven L. Taylor: Indeed, my understanding is that the Treasury is currently selling long-term bonds at slightly negative interest rates–that it, they’ll actually return a bit less than principal!–and investors are lining up to buy them.