GENEVA, SWITZERLAND – Stock markets in Europe and Asia were up on the news Monday: the Saturday 9 June agreement by eurozone ministers to lend Spain up to 100bn euros for its banks has bought time for the euro. Many of Spain’s banks have been ailing since a property market bubble burst and was quickly followed by recession, but the country’s pleas for help from the 16 other members of the eurozone have fueled concerns that the country’s problems would weaken the euro irretrievably. The BBC reports, “Currently Spain is in its second recession in three years and the economy is expected to shrink by 1.7% this year. Its economic problems have become so acute, and its borrowing costs in the international markets so high, that there have been concerns that the government would not be able to service its debts.”
The Financial Times reports Monday morning that “The market feels the Spain-EU deal has treated a source of banking sector contagion. As Barclays says in a note to clients, it offers ‘highly reassuring evidence that European governments were co-operating effectively, after a period when such co-operation seemed less evident than usual’.” But the British financial paper notes the early brisk trading in Spanish sovereign bonds fell, reflecting “uncertainty about how the bailout would affect Madrid’s funding profile”.
Reuters says “Spanish Prime Minister Mariano Rajoy at a news conference Sunday … repeatedly avoided calling Saturday’s euro zone decision to lend Spain up to €100 billion euros for shoring up its troubled banks ‘a rescue’, referring repeatedly only to ‘what happened yesterday.’”
