Spain continues to insist it will not go the way of Greece, Ireland and Portugal and ask for a bailout. But markets are betting otherwise.
Spanish bond yields spiked again today as concerns over the country’s banking system grew, notably where Bankia is concerned.
With Spain in the crosshairs, and continued uncertainty in Greece in the run-up to a mid-June election, the euro zone promises to continue wreak havoc on global markets. The situation grows more dire by the day, along with faith in Europe’s leaders.
Today, the European Union moved to ease market fears, proposing that the euro zone set up a “banking union” that would spread the risk throughout the entire 17-member monetary union.
“Without wishing to sound apocalyptic, it does feel as if Spain is gradually shuffling towards the abyss,” warned Chris Beauchamp of IG Index in London.
“Yields on Spanish bonds are spiking once again, with the benchmark 10-year now at 6.57 per cent, far too close for comfort to the 7-per-cent ‘bailout’ level,” he said in a research note today.
“Investor confidence wanes by the day, and it could only be a matter of time before the Spanish government is forced to ask for financial aid,” Mr. Beauchamp added. “This would be an event of a far greater magnitude than the bailouts of Ireland, Portugal and Greece, since Spain’s size means it would exhaust Europe’s financial firepower.”
It’s no surprise that, also today, a European confidence index slumped this month.
Global stock markets sank today, dogged by mounting fears over Spain and China’s warning that it plans no further major stimulus measures.
Tokyo’s Nikkei lost 0.3 per cent, and Hong Kong’s Hang Seng 1.9 per cent. The ugly mood carried into Europe, where markets quickly sank, and then into North America, where the S&P 500