http://www.economist.com/news/finance-and-economics/21569727-government-bond-markets-peripheral-countries-are-soaring-time-celebrate
This article talks about current situation in European Union that has been struggling since the financial crisis of 2008. According to the report by The Economist, economy shows positive signs and euro is likely to remain EU's currency. The cost of the new government borrowing is lower than it was in 2012. Big banks in Italy and Spain, both struggling economies, started to sell their long-term bonds and they are predicted to be less dependent on ECB's funds. These are all good signs but The Economist underlines that those positive signs can be misleading. Demand for Spanish and Italian government debt has come from domestic banks of those two countries and not from foreign investors. Additionally, unemployment in the peripheral countries remains extremely high, small businesses have a difficult time borrowing from the banks and the output in the periphery is forecasted to shrink this year. Germany's economy, traditionally a strongest one over the course of past four years, has contracted in the fourth quarter of 2012, which shows that both core and peripheral countries are failing to recover from the financial crisis.
I agree with Europe’s banks starting to repay €100 billion-200 billion of the amount of cash they owe to central banks due to them allowing to sell long-term bonds now. This is positive news from what “Mario Draghi, the president of the ECB, says that a “positive contagion” is sweeping through Europe.” This is great I but yes I do see that they are still in trouble. The big firms are beginning to get better but the “small firms in both countries are suffering from a drought in bank finance; when they can borrow, they pay through the nose.” They still have a lot of work to put in if they want to change their economy.
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