Eurozone crisis fears spread over possible bailouts for Spain, Italy
Source: Agencies |
July 24, 2012, Tuesday
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Print Edition
Print Edition
EUROPE is on the brink again. The crisis over too much debt in the 17 countries that use the euro flared dangerously yesterday.
Fears that Spain was next in line for a full-blown government bailout intensified following a weekend of bad news about Europe's fourth-biggest economy.
Madrid's borrowing costs on its 10-year bonds? an indicator of market confidence in a country's ability to manage its debt? hit an alarming record of 7.45 percent during morning trading. It was pushed up by reports that the country's indebted regions might join its banks in requesting expensive bailouts.
It was far more than just Spain's struggle.
Borrowing costs also rose in Italy, which has been caught up in fears that it may soon be pushed into asking for assistance. Italy's economy is stagnating and markets are worried it may soon not be able to maintain its debt burden of 1.9 trillion euros (US$2.32 trillion), the world's third-largest bond market after the United States and Spain.
Greece is already into its second bailout and struggling to keep its membership in the currency bloc. It faces tense negotiations with its international creditors who are losing patience with the country's attempts to reform its economy.
Ireland, Greece and Portugal have already taken bailout loans after they could no longer borrow affordably on bond markets. Yet those countries are tiny compared to Italy and Spain, the third- and fourth-largest economies in the eurozone.
Analysts say a full bailout for both Italy and Spain would exceed the resources of other eurozone countries.
The markets fear the prospect of double-disaster: Spain needing a bailout that would strain the eurozone's bailout funds, and a possible Greek abandoment of the euro that could spread even more fear across the eurozone.
Fears that Spain was next in line for a full-blown government bailout intensified following a weekend of bad news about Europe's fourth-biggest economy.
Madrid's borrowing costs on its 10-year bonds? an indicator of market confidence in a country's ability to manage its debt? hit an alarming record of 7.45 percent during morning trading. It was pushed up by reports that the country's indebted regions might join its banks in requesting expensive bailouts.
It was far more than just Spain's struggle.
Borrowing costs also rose in Italy, which has been caught up in fears that it may soon be pushed into asking for assistance. Italy's economy is stagnating and markets are worried it may soon not be able to maintain its debt burden of 1.9 trillion euros (US$2.32 trillion), the world's third-largest bond market after the United States and Spain.
Greece is already into its second bailout and struggling to keep its membership in the currency bloc. It faces tense negotiations with its international creditors who are losing patience with the country's attempts to reform its economy.
Ireland, Greece and Portugal have already taken bailout loans after they could no longer borrow affordably on bond markets. Yet those countries are tiny compared to Italy and Spain, the third- and fourth-largest economies in the eurozone.
Analysts say a full bailout for both Italy and Spain would exceed the resources of other eurozone countries.
The markets fear the prospect of double-disaster: Spain needing a bailout that would strain the eurozone's bailout funds, and a possible Greek abandoment of the euro that could spread even more fear across the eurozone.
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