The increases in the risk premium in countries like Greece, Portugal, Ireland, Spain and Italy lead the development of values ​​such as Germany shelter.

Currently, the risk premium is a concept that is in everybody’s mouth. The risk premium is defined as the difference between the interest which calls on debt issued by one country against another country. In the Eurozone, Germany, the state being more solvent and reliable, the risk premiums are measured as the difference between the interest rate that a country has to pay on its bonds to ten years, about what you have to pay the state German. All this points measured in basic foods.


The problem of German credit

In recent months, several European countries, including Spain, are seeing their risk premiums are increasing dramatically. This increase comes from two places:

* on the one hand, the doubts generated by these countries among investors, as having little money circulating, and being indebted countries considerably, they are required to pay higher interest,
* but on the other hand, it also increases the risk premium for the use by investors in Germany as a safe haven, even if they receive less interest on their investments, causing a lowering of the interest rate paid by Germany for the money you borrow.

The doubts in countries with financial problems

The first cause of the increased risk premium in countries like Spain is the doubt that these countries cause investors. Today, in a system where money does not flow, which does not lend itself as easily as before, entities that do not generate confidence and are heavily in debt have serious financial problems.Thus, when Spain goes to the markets to raise money, investors, few investors who today are in the market, take advantage of this lack of cash flow to demand a higher interest rate.

This current situation leads to uncertainty in the markets that Spain has to pay very high interest rates, which for many years that did not exist in the national financial system. Thus, the country has been forced to pay interest rates close to 7% in its ten-year bond, percentage growth in situations of the country may be acceptable, but in the current economic stagnation, it becomes very difficult to assume if it last over time.

Germany as a safe haven for investors

The other key to understanding the increase in risk premiums are low interest rates paid by Germany to secure funding.With the eurozone’s financial system under minimal, because of all the political and economic problems they are having member countries believe that markets are not good times to risk with investments and seek higher wages.

Therefore, seeking countries that offer low returns but they both invested capital and interest are secured: the solution within the Eurozone, is lending money to Germany a state with a consolidated economy, and not generate any doubt.

The maximum risk premium Spanish, still far from other countries

In Spain, political instability prior to the general elections of November 20, coupled with the uncertainty on the European scene caused the risk premium reached on 22 November, the 469 basis points, a figure that has declined with the advent of December, up to 356 basis points, For the good news coming from the world’s major central banks.

Anyway, although it is a very disturbing figure, is still far from the 2,900 points of the risk premium Greek or Portuguese 1,100 basis points.