Now investors are even shying away from German sovereign debt:
A “disastrous” sale of German benchmark bonds on Wednesday sparked fears the debt crisis was beginning to threaten even Europe’s biggest economy, with the Bundesbank forced to hold on to record amounts to ensure the auction did not fail.
In one of the least successful debt sales by Europe’s powerhouse economy since the launch of the single currency, the low returns offered — just 2 percent annually over 10 years — deterred investors made uneasy by the escalating cost of the crisis to Germany.
That meant the central bank had to pick up 39 percent of the 6 billion euros of debt Germany had hoped to sell after commercial banks bought just 3.644 billion euros of the issue.
This isn’t Greece or Italy or Portugal. This is Germany, the strongest economy in the Eurozone, and the fourth largest economy in the world. There shouldn’t be any question about Germany’s ability to pay it’s debt, and there wouldn’t be if it weren’t for the fact that debt is denominated in Euros. If they were in Deutschmarks, Germany wouldn’t have any problem selling them.
This just confirms what Euroskeptics have been noting for a while now: Once the defaults start, there’s no way to firewall the stronger Eurozone economies from the weaker ones while maintaining the same currency.
Germany may soon be faced with the question of wrecking the Euro, or wrecking their own economy.
Tags: Euro, European Debt Crisis, Germany