Spain has moved dangerously close to the point of no return. And with the Greek election on Sunday, I suspect investors will be battening down the hatches. Back home, Mervyn King and George Osborne, dressed in their PJs at Mansion House, last night came to the rescue to help shelter us from the foggy cloud that is Europe.
They are activating a sterling liquidity facility and they have plans to help the credit process. Under the plans, banks will be able to swap loans to individuals and firms for high-quality Government bonds, so long as they promise to lend this out at cheap rates.
Liquidity will take the shape of at least £5bn a month, injected via an emergency scheme.
Also there were hints of further QE to come. This could lead the way, in the near-term, for both gilts and risk assets to perform.
Incidentally, risk markets in the US were better yesterday too as the rumour mill about the US Federal Reserve embarking on more stimulus hit the wires.
It’s all too gloomy, so for some light relief, I'll leave you with an economic geography lesson from a broker’s note:
1. “Spain is not Greece.”
Elena Salgado, Spanish finance minister, February 2010
2. “Portugal is not Greece.”
The Economist, April 2010
3. “Ireland is not in Greek territory.”
Irish finance minister Brian Lenihan, November 2010
4. “Greece is not Ireland.”
George Papaconstantinou, then Greek finance minister, November 2010
5. “Spain is neither Ireland nor Portugal.”
Elena Salgado, Spanish finance minister, November 2010
6. “Neither Spain nor Portugal is Ireland.”
Angel Gurria, secretary-general of the OECD, November 2010
7. "Italy is not Spain."
Ed Parker, Fitch Ratings' managing director, June 2012
And a personal favourite:
8. "Spain is not Uganda."
Mariano Rajoy, Spanish prime minister, last weekend
Is it any wonder…? As markets close and await Sunday’s election, it’s now over to the Greeks to pick up the baton, although one suspects they may not hold on to it for long before letting it slip out of their hands.
Bryn Jones is fixed income director at Rathbone Unit Trust Management. The views expressed here are his own.