Spain’s short-term borrowing costs have rocketed as the debt crisis among its newly downgraded banks rolls on.
The treasury has sold 3.08 billion euros of bills at auction resulting in borrowing costs nearly tripling in price.
Now the yield paid on a three month bill has gone up from 0.8 percent a month ago, to nearly 2.3 percent today. Six months bills also leapt up to 3.2 percent from 1.7 percent
This comes after the Spanish government revealed it would need 62 million euros for its failing banks.
Spain’s fragile banking system and spiralling debt has been a hot topic for politicians at home and abroad.
Spanish Economy Minister Luis de Guindos briefed parliament about the bailout conditions and how it would be managed:
“The funds will be only requested for the financial sector’s needs and the conditions will be specific only for the financial sector as we agreed in the last Euro-group meeting. This means that the aid will not be linked to a macro-economic adjustment program as has happened in other Eurozone countries. There won’t be any new conditions in fiscal policy or structural reforms.” he said.
However, Spain has to continue address its debt problems amid a tough recession, clean up its banking system and curb over-spending to put investors at ease.
Ratings agency Moody’s recently cut Spain’s credit rating on 28 of its banks. The government’s own credit rating has also been slashed and currently teeters above junk status.