Decline and fall of the Euro; the saga continues

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The European money markets have begun to seize up as pressure mounts on the Italian and Spanish banking systems, tracking the pattern seen during the build-up towards the financial crisis in 2008.

The three-month euribor/OIS spread, the fear gauge of credit markets, reached the highest level in two years today, jumping 7 basis points to 40 in wild trading.

"Europe's money markets are undoubtedly starting to freeze up," said Marc Ostwald from Monument Securites.

"It's not as dramatic as pre-Lehman but it is alarming and shows the pervasive degree of fear in the markets. People are again refusing to lend except on a secured basis."

The credit stress was triggered by fresh mayhem in the southern European bond markets and ominously in parts of the eurozone's soft core as well, including Belgium. Spanish yields pushed further into the danger zone to 6.42pc. Italian debt reached a post-EMU high of 6.22pc before falling back slightly on reports of Chinese buying.

http://www.telegraph.co.uk/finance/financialcrisis/8677989/Europes-money-markets-freeze-as-crisis-escalates-in-Italy-and-Spain.html