Wednesday, November 5, 2008
There are more credit default swaps bet against Italy than any country in the world, except Turkey.
Spain and Italy are among the European countries worst hit, with government data showing both nations are in the grip of a recession.
"There have been big changes in the credit quality of Spain and Italy, and buying credit-default swaps is a safe-haven bet in a crisis,'' said Philip Gisdakis, a Munich-based credit analyst at UniCredit SpA.
We all knew that Spain was in trouble, due to its crashing real estate market. And I knew that numerous emerging economies were in trouble.
But I didn't know Italy was in so much trouble.
Paul Kedrosky reviews these numbers and writes:
"Apparently the future of the financial world hinges on Italy and Spain not defaulting. Who knew?"
What's up with Italy?
Well, for one thing, its GDP is contracting.
And the Financial Times reported in March that Italy is facing difficulty rolling over €50bn in debt expiring in May, as market conditions have deteriorated.
And if you need a visual to see just how hard hit numerous nations have been hit with widening CDS spreads in the last month, look at this.