There’s no pleasing stock traders. No sooner had European financial ministers granted Spain’s banks a $125 billion bailout than investors began worrying about Italy’s ability to pay its national debt – and to pitch in to save Spain. According to The New York Times, “[b]ecause Italy does not have enough economic growth to generate the money itself, the government will probably have to borrow it at high interest rates, adding to an already heavy debt load.” The Times on Monday quoted Italian Prime Minister Mario Monti’s pessimism: “There is a permanent risk of contagion.”
Although the mention of a European economic plague certainly makes ears stand up, the continent’s continual financial woes more resemble a Möbius strip of dominoes. With each new agreement to save one of the Mediterranean PIGS (Portugal, Italy, Greece, Spain), a new panic spreads on the floors of Europe’s stock exchanges.