[Skybird]

Link: The penny drops at least in Europe

The best way to understand the current increase in Italian, Spanish and increasingly French yields is that risk is finally starting to be priced rationally again; markets now realise that some countries are more likely to default or quit the euro than others. Default doesn't necessitate real insolvency: Italy is a rich country with lots of assets. Yet a country can go bust if its political system is broken or its electorate wedded to silly policies.

But this increased realism is already turning into panic. Investors are beginning to comprehend that debt levels in several countries are simply not affordable at proper interest rates.

As the penny drops, it will become ever more obvious that the euro's launch was one of the greatest political and economic blunders of modern times.