Now Spain may face bailout shame - report
Published 25/11/2011 | 16:47
THE NEW Spanish centre-right Government is considering an application for international aid, news agency Reuters has exclusively reported.
According to the report, the People’s Party, which will be officially sworn in next month, is facing a tough 2012 public deficit target, nervous debt markets and a broken banking sector against the backdrop of the debt crisis.
The funding could come from the European bailout fund or the International Monetary Fund.
The news comes as German Chancellor Angela Merkel dug her heels in further on the stance that Germany will not back eurobonds in a bid to solve the debt crisis and that the European Central Bank will not be the lender of last resort for indebted countries.
Germany is fighting the idea of eurobonds, which would replace bonds issued by individual countries, because they would allow countries like Ireland, Greece and Portugal, which are riddled with debt, to avoid getting their finances in order by essentially piggy-backing on Germany’s AAA credit-rating which could then be damaged.
Many economists believe issuing eurobonds is the only way for the euro currency to survive.
The Economist magazine has today published a hard-hitting article stating that unless Germany and the ECB move quickly, the single currency’s collapse is looming.
“The chances of the eurozone being smashed apart have risen alarmingly, thanks to financial panic, a rapidly weakening economic outlook and pigheaded brinkmanship,” it states.
“The odds of a safe landing are dwindling fast.”
However, it does say that the disaster can be averted and the ECB is the only institution that can provide immediate relief by being the lender of last resort as eurobonds appear to be off the table.
Eurozone member states are also discussing dropping bank and insurance companies’ involvement from the new bailout mechanism that is due to be up and running by 2013.
The discussions are part of wider negotiations over changing the EU treaties to introduce stricter budget rules as proposed by Germany which also wants the private sector to bear a portion of the losses in the bailout of Greece.
Earlier today indebted Italy was forced to pay record high rates in a €10bn bond issue but demand was high in a week that Germany, considered by many as the strongest in the eurozone, failed to raise one third of the money it wanted in the markets.
The yield on its six month bonds surged to 6.504pc compared to 3.535pc for a similar sale on last month while the rate for bonds due in two years hit 7.814pc compared with 4.628pc.
The auction had been dubbed a patriotic exercise with some Italian banks waiving commission in the deal.
EU economy commissioner Olli Rehn is in Rome today for talks with Prime Minister Mario Monti who is heading up technocratic government in a bid to lead the economy from the abyss.
Yesterday German Chancellor Angela Merkel and French Prime Minister Nicolas Sarkozy agreed to changes to EU treaties in a bid to stop the rot but Germany is still refusing to accept that the European Central Bank would become the lender of last resort for indebted eurozone countries.
In the US, Black Friday, or the traditional start of the Christmas shopping period, is underway.
The day after Thanksgiving sets the pace for the season with more than 152 million people expected to hit the shops this weekend – up over 10pc on last year.
There are different theories on how the day got its name.
Some believe it was coined as the day that shops begin to make a profit or move “into the black” but others say it was first used by police in Philadelphia who were sick of passengers clogging up footpaths and traffic jams.