Broken, panic-ridden eurozone

Events in the eurozone in the last few days look mysterious, at first, and on reflection, even more worrying.

This matters because our savings, our pensions and our mortgages could be affected.

What's the mystery? When you think about it, the outcome of the Greek election was the most stability-inducing one that the financial markets could have hoped for.

But they got the jitters immediately afterwards. The returns (or yield) on Spanish 10 year bonds, or IOUs, rose well above 7%.

What that means is that big investors were demanding a higher interest rate to compensate for the growing risk of lending their cash to Spain - even though the Greek result was probably what bond investors would regard as good news.

And the rate has been getting close to unsustainable levels, levels at which the country can't carry on borrowing for long.

Not much had changed in Spain over the previous few days. Yet the Greek outcome seemed to make things worse. Why?

Was it simply because eyes were temporarily averted by the distraction of an election elsewhere?

Or was it because dastardly speculators, profiting from pushing down the value of investments in wobbly countries, were shifting their sights from Greece to Spain?

It seems as though the real answer could be that there is a feeling of chaos, dislocation and deep pessimism amongst the investors and dealers who inhabit what we know as "the markets".

One expert in eurozone bonds just told me:

"This is a completely broken, dysfunctional market, experiencing bouts of panic. And there's a complete lack of confidence in the ability of eurozone leaders to shore it up."

For these operators Greece was a sideshow. In fact, Spain is also a sideshow. Italy is the horror that blocks their vision so much that, in financial terms, they can't see the other side of it.

The reason is that it would cost so much to rescue Spain, it's not clear how an Italian rescue could be paid for. So when they turned their binoculars to Spain after Greece, their hands start shaking again.

Think about it. There are four big countries in the eurozone: Germany, France, Italy and Spain. Can you have two of them on life support?

Hence, the worries about the survival of the euro persist. And, as we keep being told, damage to the euro has a knock-on effect on the UK.

It's what George Osborne and the Bank of England were scared of last week when they announced they would flood our banks with extra lending power.

Then many thought they were acting just in case Greece imploded. Now we know that emergency measures were probably going to be needed, whatever result came out of Athens.