A distress signal has come from Spain which said it cannot borrow on the international markets to save its embattled banks and wants faster help from its eurozone partners.
The worry that Spain’s problems will spread through the eurozone was top of the agenda for finance ministers and central bankers of the Group of Seven major economies as they held emergency talks by phone on the region’s worsening debt crisis.
Afterwards participants said that there was an “agreement to find joint solutions to problems of Greece and Spain” but gave no details.
Madrid’s plan to borrow to cover the massive bank debts from the bursting of the property bubble has been scuttled by nervous investors wanting unsustainably high rates of interest – near seven percent.
Tom Vosa, Head of Market Economics at National Australia Bank group said that is pushing Spain towards crunch time: “It think it will be if we see those short-term yields go above seven percent. If that starts to happen then I think we are in bailout territory. Every other country that has seen yields go over seven percent has had to ask for official assistance.”
Spanish Treasury Minister Cristobal Montoro’s dramatic statement that his country has been shut out of the international credit markets seems to be an attempt to get the European Central Bank to ride to Madrid’s rescue without forcing Spain into the humiliation of an internationally supervised bailout.