Eurozone debt crisis says hello again

If there is one investment theme which threatens to scare investors at regular intervals, it is the eurozone sovereign debt crisis.

European governments seem unable to deliver the killer blow that will put it down once and for all.

Instead, they give the debt crisis a series of nudges to keep it in check, or at least to manage investor sentiment.

Three big items of news relevant to the eurozone debt crisis have occurred already this week.

Germany risks losing its much coveted AAA credit rating.

This is because the credit ratings agency Moody’s has changed the outlook for Germany to negative. It cited the risks of wider eurozone troubles, including the possibility of Greece leaving the single currency.

Germany is the economic powerhouse of Europe, providing vital financial support to troubled members of the eurozone. If it does receive a credit rating downgrade within the next two years, as the negative outlook suggests could happen, then the European house of cards could come crashing down.

Elsewhere in Europe, Spain has implemented a three month ban on the short selling of shares.

This prevents investors from betting against companies in Spain, profiting from falls in their share prices. Such a move is designed to help remove some volatility from stock markets.

There are fears that Spain requires a further financial bailout, with the yield on Spain’s 10-year bonds reaching a new high of 7.56% yesterday.

Finally, the process of assessing whether Greece has done enough to receive further bailout funds has begun.

Representatives will consider the rate at which Greece has paid off some of its debts. Greece has been struggling to keep up with the debt repayment schedule because of their faltering economy.

Assuming the next tranche of bailout funds will not be paid as needed, it seems likely that Greece will need temporary financial assistance from the European Central Bank.

All is not well in Europe, as before.

Until decisive action is taken, which probably requires at least Greece, and possibly others, to exit the eurozone, there is no end in sight to this debt crisis.

Photo credit: Flickr/rockcohen