Spain’s bond yields quickly rose above 7% today for 10-year sovereign paper. The acceptance of austerity measures based on the Greek elections provided no confidence that Spain–in its second recession in five years and unemployment at 25%–can pull itself out of the mud. Experts continue to say that every week Spain has to pay over 6% to finance its debt is a week it moves inexorably toward what could be bailout which would cost into the hundreds of billions of euros.
Spain has already been provided with 100 billion euros for its troubled bank sector. Ironically, the markets became even more nervous about Spain then. The money the banks collect will not help close the deficits rolled up by the federal government.
The G20 will meet in Mexico this week. Calls for stimulus for Europe’s troubled nations have been ignored so far. The trouble in Spain may change that.
Douglas A. McIntyre