VoxEU offers academica macroeconomic analyses that are a bit more nuanced than the bleating in the MSM. But often this nuance is not very impressive. Currently, there’s write-up of a paper online, titled Watch the indices! Derivatives and the Eurozone sovereign debt crisis. The research question is summarized as
In retrospect, it is striking that the sovereign bond spreads of peripheral Eurozone countries surged while the economic conditions were gradually deteriorating.
In retrospect, however, it is striking that aside from Greece, the sharp rise of peripheral sovereign bond spreads and their volatility is hard to reconcile with the underlying economic fundamentals. Spreads surged suddenly, while the economic conditions were deteriorating gradually.
The authors think they have found feedback effects that got amplified by derivatives. But, reaching for what Mitchell teaches:
Language matters! Eurozone countries are not sovereign wrt. deficit spending. The decision whether to default or not is only partially up to them.
According to the authors, there were two peaks, one in 2010, one in 2012. If I read things like:
Some of the economic experts had argued in June 2010 that the best option for both Greece and the EU would be to engineer an orderly default on Greece’s public debt, and by the same time force Greece to withdraw from the eurozone, with a reintroduction of its national currency the drachma at a debased rate.
I have an idea what might have driven up interest rates without having to grasp at derivatives.
Add to this
This debt restructure not only converted “high rate bonds with short maturity” to “low rate bonds with long maturity” (which significantly lowered the debt costs), but also introduced a direct 53.5% haircut to the nominal value of all government debt held by private bond owners.
and again, rising interest rates in light of default/debt cuts make perfect sense. And if this was done for one Eurozone country, it could have been expected for others as well, hence the spillover effects.
Speculators are aware that the decision to default/perform a debt cut depends on the ECB (or more generally the Troika) and react to their actions and statements, no matter the macroeconomic indicators of the (fiscally none-sovereign) countries.