Eloise HorsfieldBy James Bryce
FEARS continue to grow that Spain may need an emergency bailout.
It comes after borrowing costs inched ever closer to the level that led to three other European countries to require help.
Lending costs on 10-year bonds rose above six per cent for the first time this year, with economy minister Luis de Guindos admitting the country was back in recession.
The increase means Spain is now perilously close to the seven per cent mark, which proved to be the tipping point for Portugal, Greece and Ireland.
The news led to British banks losing a combined 2.5 billion euros in market value on Monday as investors worried about the knock-on effect.
The rise in Spain’s bond yields (to 6.2 per cent) caused panic for the eurozone as the country’s 1.1 trillion economy is seen as too big to bail out.
And while the International Monetary Fund (IMF) has predicted the eurozone recession will be ‘milder than forecast’ this year, new risks are expected for Spain whose economy will shrink by 1.8 per cent.
Japan has moved to ease the impact of the eurozone crisis on the global economy by pledging $60bn of loans for the IMF.
Britain is likely to be asked to stump up £10 billion to prop up the fund.
But it does not appear that this will help Spain in the short term according to analysts.
“We’re back in full crisis mode,” said Lyn Graham-Taylor, a strategist at Rabobank.
“It is looking more and more likely that Spain will need a bailout.”
Unemployment in Spain is the highest in Europe with a record 4.75 million out of work, including half of its under-25s.
Spain may need a bail out but the language coming out of the ECB is that thy are not going to get one because they know they cannot afford to bail out Spain. Effectively Spain is on it´s own and has only two options cut, cut and cut again till the patient dies or leave the single currency, we all know the latter is not going to happen so better start writing the obituary.
I totally agree with you Peter, Spain is far to big to bail out and no they wont leave the single currency but what is making things worse is that it’s affecting the markets because investors are too scared to invest in something that isn’t safe with no returns but also Spain wont admit it is so much difficulty and that is partly why they are on their own in this mess.
spain is to big to bail out so the only option is for the NEW PESETA or Spain will die and there will be blood on the streets .
They have created much of this mess themselves. They do not look like they are changing their attitudes to me. Who wants to invest in Spain beit business or holiday property. I think I read that if a Company makes someone redundant in Spain they have to pay 33 weeks for every year they have worked there. Who wants to set up a business on those terms, easier to come to the UK where we have no rights. It is not much fun being an employee in the UK, you don’t know if you have a job from one month to the next. Maybe better than having no job though.