The temporary surge of optimism on the markets over the EU’s bailout for Spain’s troubled banks has been short lived. Anxiety has returned as fears grow over the impact on Spain’s public deficit.
One issue is whether the European money, all 100 billion euros worth, comes with strings attached for the government.
Stock Market Analyst, Ramon Zarate explains:
“The markets have eventually realised that the scenario is too similar in the short term. The financing needs of the Spanish government have increased after this loan because, it means more of a deficit that will need to be funded.”
Madrid appointed a new governor of its central bank on Monday – the government says its sticking to its borrowing plans but as those costs rise Spain could end up locked out of funding markets like the three other eurozone countries already forced into bailouts.
In Rome all eyes are on Greece. Sunday’s elections are over shadowing the country’s future in the single currency. If Athens should leave the bloc EU officials are discussing ways of limiting the fallout. The Greek domino must not be allowed to knock over Spain and of course the economy too big to fail, that of Italy.