Italy and Switzerland may share a mountainous border, but the two countries could not be further apart when it comes to their economies and how the financial markets perceive them.
As Italy struggles with a ruinous debt pile and a significant budget deficit, Switzerland has investors paying to lend money to them. Yes, that is correct, paying to lend money to them.
Switzerland has just completed an auction of six months debt that saw a negative coupon of -0.251 percent. You read correctly, investors are guaranteed to get back less than they lend the government and unlike in Greece, they are not being forced to do so.
Compare this to Greece, who today auctioned six month debt with an average yield of 4.55 percent. The fact that Greece can raise any money is a minor miracle and the cover ratio was even 2.62!
Today, we have had further reports in the Italian business daily Il Sole that the Italian economy will shrink between 1.3 percent and 1.5 percent in 2012. In amongst all this, we have the refinancing needs of Italy, which is an eye watering €427bn in 2012 alone.
To add to this woe, the Spanish government are desperately trying to avoid becoming the fourth Euro member to require a bailout. They need to refinance €161bn of debt in 2012 against a backdrop of recession, 20 percent unemployment and youth unemployment at over 50 percent.
Anyone who thought the second Greek bailout signaled the end of the Euro debt crisis was sadly mistaken.
