Economist Nouriel Roubini says investors’ jitters also affecting Finland

Nouriel Roubini

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Nouriel Roubini, Professor of Economics at New York University, warns that the market storm that has been shaking the weaker countries of the eurozone has finally spread to the “core”. The crisis has led investors to doubt the ability of countries to pay back their debts.
      Roubini voiced his views in a Twitter message on Wednesday. In the message Roubini noted that the interest differential on bonds taken out by Belgium, France, Austria, and Finland compared with loans taken by Germany had grown.
      Similar views were put out by Jaques Cailloux, economist at the Royal Bank of Scotland.
      In his report dated Tuesday, Cailloux said that Germany would continue to benefit from its position as a safe haven for investors.
     
Bond market interest rates indicate how high a price a country needs to pay for money that it borrows from the market.
      In Europe, the interest differential is examined by comparing the interest that a country pays for bonds with the bond interest paid by Germany.
      On Tuesday, the premium that Belgium, Austria, and France had to pay over Germany on ten-year bonds was 0.74 percentage points.
      At the beginning of the week the figure was 0.54 points.
     
Taking a calmer view of the situation is Timo Ritakallio, deputy CEO of the Finnish pension company Ilmarinen.
      He does not the slight increase in Finland’s cost of borrowing to be “contagious”. However, he does see it as a worrisome “symptom”.
      “In this crisis there is the unfortunate characteristic, that when a symptom emerges, there is also a disease”, Ritakallio says.
      Ritakallio sees the behaviour of large institutional investors as one reason for the rise in Finnish interest rates. Ritakallio says that many investors may have sold Finnish bonds because their market is small and inflexible.
      Compared with the whole year, the situation has turned upside down.
      Until now Finland has benefited, in the form of low interest rates, from investors who have been selling the bonds of crisis countries, preferring instead the bonds of euro countries considered strong.


Previously in HS International Edition:
  Growing fear of recession in eurozone (15.11.2011)
  Rehn: Europe teeters on brink of recession (11.11.2011)

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