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Spain’s economy sinks deeper into recession; financial costs balloon

Monday, July 23rd 2012 - 20:16 UTC
Full article 5 comments
Different views from Minister de Guindos and the Central bank Different views from Minister de Guindos and the Central bank

Spain's economy sank deeper into recession in the second quarter, its central bank said as investors spooked by an undeclared funding crisis in its regions pushed the country ever closer to a full bailout

Economic output shrank by 0.4% in the three months from April to June having slumped by 0.3% in the first quarter, the Bank of Spain said in its monthly report.

Economy Minister Luis de Guindos ruled out a full-scale financial rescue on top of the 100 billion Euros already earmarked for the country's banks, but Spain's sovereign bond yields stayed mired in the danger zone.

In contrast to de Guindos, who told lawmakers there was little else Spain could do to ease the tensions after it approved a 65-billion-Euro austerity package last week, the central bank's deputy governor said more belt-tightening was needed.

”(Current market problems) reflect problems in Spain as well as the Euro zone,“ Fernando Restoy said after a conference in Madrid when asked about market stress.

”We need to continue further along the same line. We need more cuts, more reforms which will restore market confidence and mechanisms which will strengthen the monetary union.”

Earlier, media reports suggested half a dozen regional authorities were ready to follow in the footsteps of Valencia in seeking financial support from Madrid.

Prohibitively high refinancing costs have virtually shut all of the 17 regional governments out of international debt markets, forcing the worst hit to seek loans from the central government to meet bond redemptions.

Spain's sovereign debt yields rose above 7.5% on 10-year paper on Monday, well above the 7% level that triggered the spiral in borrowing costs that led to bailouts for other Euro zone states.
 

Categories: Economy, Politics, International.

Top Comments

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  • British_Kirchnerist

    Austerity clearly isn't working

    Jul 24th, 2012 - 11:21 am 0
  • aussie sunshine

    No problem!! Spain shall rise.
    It rose back in the 50s WITHOUT the help of the Marshall Plan so I
    don´t see any problem now.

    Jul 24th, 2012 - 08:24 pm 0
  • British_Kirchnerist

    #2 What are you're political views? You come over all leftist on the colonial issue but here and on the thread about that anti-Argentina woman (Aznar's wife?) you seem to support the most conservative forces in Spain; you even said she was a Thatcherite like it was a good thing!

    Jul 25th, 2012 - 09:55 am 0
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