Euros….or the Euros?

During this season of (increasing) discontent, you may see any European you know constantly checking his or her mobile device for two crucial pieces of information: the “spread” and the “score.” It is maybe the most visible sign of these troubled times that both numbers, despite being intrinsically void of content, have become such sources of (rare) joy and (more frequent) dispair for most Europeans.

The first one, the “spread,” is (by media consensus) the most heavily monitored indicator of trouble, or lack thereof, for the latest European country about to fall victim of the “bond vigilantes.” The spread is the difference between the current cost of new borrowing for any particular European country X and the cost of new borrowing for Germany, the bellweather economy. [Incidentally, such is the state of the public debate on the EU that these days (by media consensus) any non-German European country is labeled as in the periphery in the media.] The spread raises if country X misses (i.e, if it stumbles on its path to economic and financial recovery) or if Germany scores (i.e., if it outperforms country X or welcomes with open arms investors looking for safety).

The second one, the “score,” is the latest outcome of any of the soccer matches currently being played in Poland and Ukraine for the 2012 European Cup of Nations. There, favorite low-spread nations (e.g., Holland) continue to stumble (with the usual German exception), high spread nations (e.g., Spain) continue to shine, and the other mediterranean teams (France, Greece, Italy) muddle through.

Despair in the “spread” and solace in the “score” is what any of us European expats dread to find and hope to discover when (openly or secretely) we click on our devices these days (and stop doing anything else we were doing).

Normally, a connection between these two events would never occur to any of us. After all, financial markets are serious business [notwithstanding what I wrote in a previous blog post], while soccer is not, “just a game” we are told by pundits who know better.

Except that these days a soccer field may be one of the last level playing fields where European countries may challenge each other (and, in doing so, any pre-conceived notion of what they are supposed to be). Italians were sparkling in their attack form against Spain…but wait, aren’t Italians supposed to master defense and nothing else? Greece fought bravely, while playing with a man down, against host Poland…but wait, aren’t Greeks supposed to lazily lay under the sun while spending German money? Spain shined against Ireland with an admirable display of flair…but wait, these two countries are bankrupt so how can they even field competitive teams? Holland is nearly out after uninspired performances against (near bankrupt?) Portugal and Germany…but wait, the Dutch were the favorites to win it all (and they have a low spread with German bonds, at least for now)…

Levity aside, such are the panic spyrals swirling around the global financial markets, many of which with little or no connection to fundamentals, that one should not be surprised to find a good score to lead to a good spread. Only a few days ago it was the highly-respected President of Italy, Mr. Napolitano, to state that soccer wins cannot fix all our problems, but they certainly can help.

And we will take any help these days, Mr. President…if only Italy’s Balotelli could learn to keep his cool in front of the goal like an English trader selling Spanish bonds in front of a Bloomberg terminal…

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About ppasquar

Associate Professor of Finance at the Ross School of Business, and long-term Napoli fan.
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