The financial crisis threatening the Spanish government deepened Thursday as its borrowing costs hit a new euro-era high, touching levels that previously forced other euro-zone countries to seek sovereign debt bailouts.
The Italian government’s borrowing costs soared at a bond auction Thursday, a development that will make it more difficult for Prime Minister Mario Monti to avoid having to seek financial help from other euro-zone members.
And just what are these nose-bleed borrowing costs that send whole nations scurrying for OPM? They’re in the range of 6.0%-7.5% interest rates. The Spanish 10-year bond, for instance, now runs for 6.96%, “a new euro-era record,” while the Italian 10-year bond goes for 6.23%.
What were the interest rates in another one-among-twenty or so nations (which august club includes these nations of the EU), the US at the end of the Carter/beginning of the Reagan era? In 1980, the US 10-year bond rate peaked at 12.84%; in 1981, it got as high as 15.32%. Our 10-year bond rates had been above 6.96% since early 1974, and they didn’t fall below that level again until mid-1992.
Who bailed us out when we had such trouble? We did. We handled our own problems.
But there was a sense of responsibility in those days. Today, it’s all OPM, and that’s a bottomless piggy bank from which every nation should be able to draw.