Capital flight from EU bonds now driven by fear of Euro collapse!

Country by country the costs of borrowing to cover for sovereign debt has climbed within the euro zone. Yet up to this point the rise in interest rates being paid has reflected the debt and payment situation of each individual country concerned.

An article published overnight in the Wall Street Journal, linked here, now spells out in thoughtful detail, how that is now ceasing to be the case and that the drive now appears to be fear of a euro collapse itself, which eventually of course will impact even Germany's bunds. The conclsion is worth quoting here:

The dilemma that Germany faces is that the gathering capital flight from Europe's government bond markets may leave too little time for a long integration process to be completed.

The commission proposals are an implicit acknowledgment that the crisis response so far is failing to stem the turmoil. Pessimism is growing about the success of the planned expansion of the European Financial Stability Facility, the euro zone's bailout fund. Meanwhile, more and more euro-zone governments are seeing borrowing costs rise as investors focus not just on the risk of default, but on the risk of a break-up of the euro.

Elsewhere an article from Bloomberg, published in Business Week, linked here, predicts a fall in German and French manufacturing indices to be published today, which, indicating renewed recession, is likely to add further pressure across the Euro Group.