The spread of oil slicks is marked by dead fish, a scramble to deploy protective buffers and resolute officials denying speculation that the situation is getting out of hand. The spread of financial contagion is marked by a jump in interest rates, a scramble to deploy protective buffers and resolute officials denying speculation that the situation is getting out of hand.
A scan of some of Bloomberg News's top headlines this morning shows the lack of confidence in Greece's ability to constrain its runaway debt continues to spread across Europe.
Spain agreed to pay 3.5 per cent on 2.35-billion euros of five-year debt it sold Thursday, 0.7 percentage point more than it paid on a similar sale nine weeks ago and a higher yield than investors are demanding from Thailand, where the government has been locked in an at times bloody struggle with street protestors for a month.
The Czech Republic's central bank cut its benchmark interest rate to 0.75 per cent, a quarter point below the European Central Bank's key rate. The decision surprised 14 of 17 in a Bloomberg survey who predicted the Ceska Narodni Banka, or CNB, would leave interest rates unchanged. The central bank didn't release the reasons for its decision, but the move surely reflects a desire to create a buffer against Europe's dim economic prospects.
And finally there's John Lipsky, the No. 2 at the International Monetary Fund, who told Bloomberg in a television interview that the IMF is not in talks with Portugal and Spain over a possible rescue, trying to douse rumours to the contrary.
It's never a good sign when authorities feel compelled to forcefully deny speculation. Mr. Lipsky is no doubt telling the truth. But if perception becomes reality, it doesn't matter.
For years, Europe has largely been able to stay out of the spotlight of international discussions about the biggest threats to the global economy thanks to the intensity of the debate over profligate American consumers and Asian currency policies. But United States savings rates are rising and China appears poised to lead a general loosening of foreign-exchange controls in Asia. At the Toronto Group of 20 summit, the big global economy question will be what is Europe doing?