Spain’s bond yields rose again as it became clearer that the country cannot survive without a huge financial bailout costing hundreds of billions of dollars. Today’s auction of April 2014 bonds required an average yield of 4.71%. The auction of July 2017 bonds forced a yield of 6.07%. Spain continues to fall more deeply into its second recession in five years, and unemployment remains stubbornly above 25%.
Spain will get a bailout, but it will be on very unfavorable terms. Germany has repeatedly said that direct purchase of the sovereign debt of financially weak nations is not an option for dealing with the problems of Spain, Portugal or Italy. Germany also wants extremely close monitoring of any austerity measures put in place in exchange for aid, an action that would take a great deal of control from Spain over its own budgets and adherence to budget parameters.
Douglas A. McIntyre