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Europe considers limited rescue for Spain

Europe considers limited rescue for Spain
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European officials are said to be considering a limited bailout programme for Spain although Madrid has not yet requested assistance.

Germany’s Angela Merkel is looking for a way to enable Spain’s reluctant premier Mariano Rajoy to access eurozone rescue funds while not having to impose new economic reforms.

Meanwhile the European Central Bank, by leaving interest rates unchanged is still putting the onus on politicians to deal with the eurozone debt crisis.

Financial analyst Robert Halver believes the ECB cannot sit on the sidelines for long:

“The ECB will act but after the next EU summit, and then it must. It has to act because the Eurozone is burning and the only one that can save it is the fire department, the ECB.”

With markets reacting badly to the growing crisis Spain is facing soaring borrowing costs as few investors are willing to buy bonds or service loans to help the government deal with its public deficit.

Meanwhile pressure is growing on the bank at the heart of the storm with the launch of a corruption probe.

Bankia which was badly hit by toxic loans after the collapse of Spain’s real estate sector has had to be bailed out to the tune of 19 billion euros of state aid.

But thousands of small shareholders, drawn into Bankia’s July listing after an aggressive marketing campaign have seen their investments wiped out as the bank’s stock has dived.