by Calculated Risk on 5/21/2011 07:07:00 PM

Since the world didn't end ...
• Summary for Week Ending May 20th
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From the WSJ: France Signals a Shift on Greece

French Finance Minister Christine Lagarde signaled Paris might support a rescheduling of Greek debt, warning that Greece is at risk of default if it doesn't do more to bring its public finances into order.
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"What we certainly don't want is a state bankruptcy, a default, in Europe," Ms. Lagarde said in an interview published Friday in Austria's Der Standard newspaper. "You can use a lot of words—reprofiling, restructuring, re-this, re-that—but what there won't be is a restructuring of Greek debt." At the same time, she said: "We would accept anything that is based on a voluntary accommodation by banks."

"If the banks decided unilaterally after contacting the Greek authorities to offer a lengthening of the repayment time frame, she wouldn't be against it," Ms. Lagarde's spokesman said

Lagarde's comments carry significant weight, and she is the leading candidate to become the new IMF managing director, from the Irish Times: EU leaders set to nominate Lagarde for IMF post

And from Bloomberg: Italy Outlook Revised to Negative by S&P, Prompting Vow of Faster Reforms

Italy’s “current growth prospects are weak, and the political commitment for productivity-enhancing reforms appears to be faltering,” S&P said. “Potential political gridlock could contribute to fiscal slippage. As a result, we believe Italy’s prospects for reducing its general government debt have diminished.”

The yield on Greece ten year bonds increased to a record 16.6% and the two year yield was up slightly to 25.5%.

Here are the ten year yields for Ireland at 10.5%, Portugal at 9.4%, Italy at 4.8%, and Spain at 5.5%.