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Saturday, April 7, 2012
6 reasons Spain could be Europe's next debt-crisis victim
6 reasons Spain could be ... Europe's fiscal crisis just won't die. And now malevolent market forces are hounding one of the continent's biggest economies.
Standard and Poor's defines debt crisis formally as the divergence between long- and short-term bonds of 1000 base points or more. Ten base points equal a 1 percent rate increase. Therefore, if the interest rate on long-term bonds is 10 percent above short-term bonds, the country is in a debt crisis. Less formally, this means that investors in international bonds see a country as failing economically. Therefore, the long-term prospects of the relevant national economy are bleak, meaning that the rate for long-term bonds rises quickly.
Standard and Poor's defines debt crisis formally as the divergence between long- and short-term bonds of 1000 base points or more. Ten base points equal a 1 percent rate increase. Therefore, if the interest rate on long-term bonds is 10 percent above short-term bonds, the country is in a debt crisis. Less formally, this means that investors in international bonds see a country as failing economically. Therefore, the long-term prospects of the relevant national economy are bleak, meaning that the rate for long-term bonds rises quickly.
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