Greece shows euro not Titanic as ECB keeps region's bonds afloat

By David Goodman

In the depths of the euro region?s debt crisis, Italy?s finance minister compared the currency with the Titanic: if one country goes down, they all do.

Less than four years later, with the prospect of a Greek exit at the fore once again, investors are betting the European Central Bank has made the rest of the region unsinkable.

Debt from Europe?s other most-indebted nations this time is supported by the ECB?s 1.1 trillion euro ($1.2 trillion) bond- buying plan. While yields in Italy and Spain have risen from the record-lows touched earlier this year, they are still a small fraction of the euro-era highs reached in the debt crisis, when investors sold on concern a Greek exit could spark a domino effect and splinter the currency bloc.

?I don?t think Greece really threatens the future of the euro-area anymore,? said Jan von Gerich, chief strategist at Nordea Bank AB in Helsinki. ?The ECB certainly has the means to prevent another crisis. The widening potential for spreads, even in a ?Grexit? scenario, is really not that huge.?

Greece?s bonds are tumbling this month as investors see scant progress on a financial deal to prevent a default.

The yield on notes due in 2017 jumped above 28 percent on Thursday, the highest since March 2012, when the country implemented the biggest debt restructuring in history. Italian bonds maturing the same year yielded 0.19 percent.

IMF Payments

Standard & Poor?s downgraded Greek debt to CCC+ from B- on Wednesday, citing the deteriorating economic outlook.

The Greek government that took power in January proposing to end austere budgets has been locked in talks with creditors over measures attached to its bailout loans. It must make payments to the IMF of 200...