Arab Today, arab today pressure on spain mounts despite greek result
Last Updated : GMT 07:46:06
Arab Today, arab today
Arab Today, arab today

Pressure on Spain mounts despite Greek result

Arab Today, arab today

Arab Today, arab today Pressure on Spain mounts despite Greek result

Madrid - AFP

Spain was thrown back onto the front line of the eurozone debt crisis on Monday as its long-term borrowing rate shot above seven percent, dashing hopes for a respite after the Greek election. Market fears of the debt crisis spreading from Greece to the eurozone\'s fourth-largest economy, Spain, and perhaps the number-three economy, Italy, appeared to advance instead of retreating. Sunday\'s elections put Greece\'s conservative New Democracy party in the lead, with enough seats to form a ruling coalition committed to austerity measures set out in the nation\'s 130-billion-euro ($165 billion) EU-IMF bailout. \"The country does not have a minute to lose,\" said the party\'s leader Antonis Samaras. And the financial markets did not give much time for a pause. After a brief rally on the receding prospects of a Greek euro exit, European equities quickly pulled back. On the government debt market the rate of return investors demanded to hold 10-year Spanish bonds leapt to 7.061 percent -- the highest level since the birth of the euro in 1999 and a level regarded as unsustainable over the long term -- from 6.838 percent late on Friday. The gap with the yield on German 10-year bonds, the eurozone benchmark, widened to a record 5.56 percentage points. Italy\'s bonds, too, traded above six percent. \"Despite the fact that this has been sold as a victory for Europe, in fact the situation Greece is in is no better than it was and in fact quite a lot worse than it was three months ago,\" said Edward Hugh, a Barcelona-based economist. \"Three months have gone by and not a lot has been done. And the reality is they want to renegotiate in some way even though they say support it,\" he added. For Spain, the market reaction was not good news, Hugh said. \"There is no bounce from the Greek election and what bounce there is is in the opposite direction,\" he said. Investors worried about the risk of a full-blown Spanish bailout despite a June 9 eurozone agreement to loan Madrid up to 100 billion euros to save banks exposed to the collapsed property sector. The exact figure to be requested will be set after an audit carried out by two international consultant groups, Oliver Wyman and Roland Berger, due by June 21 but expected imminently. Federico Steinberg, senior international economist at Spain\'s Elcano Royal Institute, said the Greek elections only clarified doubts about the nation\'s rescue but did not resolve them. He cautioned against reading too much into the rising Spanish debt risk premium, saying a Spain bond issue due Thursday would be a better indicator of market sentiment. \"But the conditions for the 100-billion-euro Spanish banking rescue have still not been cleared up,\" Steinberg said. \"The international markets are scrutinising this and we still know nothing of the conditions.\" The IMF warned Friday that Spain must implement comprehensive reforms to win back market confidence even after securing the rescue loan for its banks. Among the hardest to digest: -- Raising value added tax (VAT) now -- a step the ruling Popular Party had promised not to take during its election campaign; -- Immediate legislation on future public wage cuts; -- Separating \"non-viable banks\" from those that need no aid and those that are viable but need support. It also advising delaying some of the austerity squeeze on the economy, which is in recession and suffering a 24.4 percent unemployment rate, the highest in the industrialised world. But Prime Minister Mariano Rajoy, in an informal briefing to Spanish media at the weekend, reportedly said he would not be following the IMF advice on VAT or public wage cuts. In a speech to his party members he vowed, however, to pass reforms to make the economy \"more flexible and competitive\". Rajoy, upon his arrival in Mexico for a meeting of leaders of the world\'s top 20 economies, said \"I think what we are going to transmit is a message of confidence in the euro.\" G20 leaders will seek at their Monday summit to buy the global economy some breathing space with new support for an IMF financial firewall and for Greece. Meanwhile, the bad numbers kept rolling in for Spain. The mountain of doubtful loans held by Spain\'s banks surged to a new 18-year record of 8.72 percent of total loans against 8.37 percent in March and 8.15 percent in February, the Bank of Spain said Monday. Spain\'s public debt rose to 72.1 percent of gross domestic product in the first quarter of 2012 from 63.6 percent in the same period a year earlier, according to latest central bank data. The government expects the public debt to reach 79.8 percent of GDP by the end of the year, without including the impact of the huge eurozone banking loan. The ratings agency Moody\'s Investors Service, which slashed Spain\'s rating to one notch above junk bond status last week, projected the public debt would hit 90 percent of GDP this year.

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Arab Today, arab today pressure on spain mounts despite greek result Arab Today, arab today pressure on spain mounts despite greek result

 



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