Interest rates on Irish government bonds rose sharply after the government announced a couple days ago that it would double its spending cuts and limit tax breaks in order to fix its huge budget defect.
The rate rose to 7.6% from about 2.5%.
Borrowing rates in the other trouble EU countries also rose sharply.
Because of the high rate, Europeans are simply not buying the bonds. Ireland has enough cash to keep going until June but then what ? Some experts credit the volatility of the Irish market to the fluctuations caused by one trade because the market is so small - as in there is just not that much trading going on .
It seems like many countries in Europe are attempting to decrease their trade deficits. However, the public is interpreting this the wrong way and removing their money from securities markets. The cost of borrowing in many European nations is increasing as well, which even though many of these economies are small open economies, does not bode well for Europe as a whole.
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