With all the turmoil in the United States, the basket case known as the Eurozone is starting to freeze up. And that spells trouble for the global economy.
Bloomberg reports that Spain and Italy are now struggling to avoid becoming the next victims of the European debt crisis with their bonds hitting record highs. Investors are not convinced Silvio Berlusconi's government can avoid a bailout with his grip on power weakened by corruption allegations against him and some of his main allies.
Translated into English, the movement on the bond markets tells us this: investors are worried that Italy, the euro zone's second-largest debtor nation, and Spain might struggle to handle their debts. Their economies are sputtering and, as a result, investors are demanding a steep premium to lend them more money. Hence the movement in the bonds. When bonds go up, it's a bad sign.
Economist Paul Krugman says we should start freaking out about Europe. The crisis is every bit as bad, perhaps even worse, than what we have seen in the US. Krugman writes: "I really don't know how this is going to play out; Italy and Spain are too big for extend and pretend, and they're also too big to save. But this is huge, and just as worrying in its own way as the US crisis of governance."
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