http://www.nytimes.com/2012/07/23/world/europe/sicilys-fiscal-problems-threaten-to-swamp-italy.html?src=me&ref=general
Spanish Panic
THINGS are rapidly getting worse in Spain. Bond yields have risen to over 7.5% today, on the back of a shaky government debt auction last Thursday, and the failure of one of its regions (Valencia) that now needs help from Madrid. In line with this bad news on the state of the government coffers, the cost of buying an insurance policy against Spanish default (credit default swap premia) is up, and is increasingly diverging from Italy’s (see chart). Investors’ views of Spanish companies are just as gloomy as of its government finances. The Spanish stock-market—the IBEX 35—is down 30% this year, as any expectations that company profits will lead to decent dividends anytime soon are thin on the ground. Things cold get worse as the week progresses, particularly if preliminary measures of output to be released tomorrow are weak.
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