The credit rally has been dragging its heels since the beginning of the year, and now strong signals are beginning to drive the price of capital up, alongse other recessionary indicators. The next downturn, the one we all anticipate and no one dares prophesy, is almost upon us.
BusinessEurope, the EU-wide lobby, warned this week of a "very worrying situation" as it become harder to raise money at a viable cost, if at all. The group called on the European Central Bank to send a "clear signal" about its collateral policy. Fears of tougher ECB rules are a key factor causing market flight from Greek debt.
The sudden halt in bond issues is disturbing since companies have been relying on capital markets to raise money as an alternative to Europe's fragile banks. The ECB said on Tuesday that 42pc of small businesses in the eurozone had reported worsening credit conditions in the second half of last year, despite the emergency stimulus of the authorities.
There
is no more good news to buoy up the markets and sovereignty blow-ups
are travelling down the tracks.
Ambrose Evans-Pritchard also reports that Greece is likely to lose key voting rights at EU level, as the Commission invokes the Lisbon treaty to impose austerity measures. Without separate corroboration, this is not a clear step on the part of Europe. An ultimatum of a month has been given to impose further cuts and investigations into unaudited deficit financing is ongoing. Whatever the mechanisms, Greece's political class has supinely accepted the demands of their peers and have embarked upon depressionary pip-squeaking, until political tolerance for such measures dies. If the Greek government falls, default follows.
The Labour government continues to reserve its judgement (a charitable interpretation) as it is unclear if it has the political courage or legal immunity to resist a Greek bailout. A welcome irony if the Lisbon Treaty proved a final nail in the coffin of Broon.