Euro Crisis: Pressure Grows As Spain 'Critical'
The cost to Spain of servicing its debts hit a critical level on Thursday after the country's latest credit rating downgrade and a blow to hopes of a resolution to the euro crisis.
The interest rate on Spanish 10 year bonds briefly topped 7% - a new euro era high for the country - before slipping back slightly.
It happened shortly after Germany's leader again refused to heed demands for the eurozone's powerhouse economy to ride to the rescue, despite growing pressure from world leaders.
The 7% level is a psychologically significant threshold and prompted stock markets to extend their losses and the value of the euro to drop.
Greece, Ireland and Portugal were all required to request financial bailouts when their respective 10 year bond rates rose above 7%.
It's considered unsustainable by investors, though Italian bonds hit 7% in November 2011 before falling back again and Spain will hope for a similar response from the markets.
In the wake of today's deveopment, Spain's Economy Minister Luis de Guindos pledged action to get its borrowing costs down in the coming days.
The tipping point was reached shortly after Angela Merkel had told the German Parliament that Europe must press ahead with closer political and fiscal integration, appearing to again rule out any immediate intervention.
"It is our task today to make up for what was not done (when the euro was created) and to end the vicious circle of ever new debt, of not sticking to rules," Merkel said.
"I know that it's arduous, that it's painful, that it's drawn-out. It's a Herculean task but it is unavoidable."
She also wants the European Central Bank to a "bigger role" in overseeing banks to avert further turmoil in the industry.
Single currency nations France, Italy and Spain are demanding more immediate action, saying that reforms like euro bonds - which would effectively allow euro countries to borrow money at a single, lower rate - are needed to halt the contagion from Greece.
The German central bank has ruled out greater financial integration without improved fiscal union first.
Germany's position expects to come under siege at next week's G20 summit as those in the firing line of the crisis endure further pain.
Credit ratings agency Moody's downgraded Spain by three notches last night, leaving its bonds one step away from junk status.
Cyprus was also downgraded.
Markets were also underwhelmed this week by the 100bn euro (£80bn) rescue plan for Spain's banks.
There are severe nerves too over the prospect of an anti-austerity vote dominating the Greek election on Sunday, opening up the prospect of a 'messy' exit from the single currency.
Investors lack confidence of progress at next week's G20 summit in Mexico.
Italy completed a planned bond sale today but at a substantially increased cost over worries that it will be next to come under the market microscope.
what do you think?
Still got their heads in the sand!
The face on her says it all.MY REICK IS FALLING APART.
Actually, it is spelt 'Reich' (always with a capital as common nouns are capitalised in German).
Shouldn't it be spelled "Wreck" David???
Universal disaster this EU thing.
The cost of doing nothing other than talk is crippling. The leaders of the Eurozone countries simply will not face facts, which are that the economies of the member states are far too divergent for the Euro to have worked, and that the poorer countries will have to be helped to leave the Euro and re-establish their own currencies. Once that is done, they will be competitive again. The loser will be Germany which will be uncompetitive in those markets - which is one reason why Germany has bullied everyone else into submission.
Spot on Davie. There are none so blind as those who will not see. The Euro experiment is falling apart and it is time for a large dose of reality across the channel
Calling for closer political and fiscal union which no one in europe, except the politicians, wants. They knew the Euro was doomed to failure when they created it. Their plan has always been to create 'greater political and fiscal union' in the chaos resulting from the Euro's collapse. It may yet happen if we do not stop it. This will be Germany's conquest of Europe by other means.
Fine words peter.
When the Franco German alliance don't get what they want from other countries referendums they simply force them to have more referendums until they do get thier own way. They seem to be applying this kind of tactic to try and sort out Greece and Spain. Throw a nominal amount of money at the problem. If that dosn't work throw some more, etc. When posters here say that they have run out of ideas they are tottaly right. Stubbornly clinging to the belief that they are right and that they will get their own way eventually they will drag us all down with them. England forever.
Carpathia to Titanic - we thought you said it was all fixed........................
Not sorry! I joined the Common Market. Thanks to Westminster, I'm now enrolled in the EU. Downright dishonest. And the only way out, it seems, is the collapse of the EU with its attendant swarm of vampire bureaucrats. But there's a glimmer of hope ........
If we have another economic crash.... Then its official. Keynes was wrong.
How can Spain justify the comment they have to get borrowing costs down just AFTER they've borrowed billions more - How does this REDUCE their debt ? Unless of course after borrowing all these billions, like Greece they'll tell their creditors they have to take a 50% cut. But then they did use the same American company to do their audit as Greece did when they GOT their clean bill of health to join the euro! Was it coincidence do you think that at the time the dollar was at parity with and losing ground to the euro, but now the 'mighty' dollar is far in front of most other currencies again. It must be coincidence surely or maybe it's the great O'bama doing his thang !
Windows Live User
So much for countries joining the European Market and looking after each other Every man for himself
Can anybody remember when those of us who always said the Euro was a stupid idea were 'ridiculed' by those thought they knew best? Funny how quiet ALL the Europhiles all are now. I hate to say 'I told you so' but.......
We told you so! Hope the UK will see sense in the next European elections and vote UKIP to deliver the strongest possible message to the government. Referendum now!!!
As we are a vassal state of the USA, and their veto in the EU, I don't think that we will be allowed to leave.
OK John, you hate the States, but this is about the euro zone. Obviously you don't have the ability or the intelligence to differentiate between the two. I'm interested in what you'll connect the US with next. Maybe the recent bad weather. It would make more sense than your incoherent ramblings.
They say that the Euro is collapsing against every currency in the ENTIRE world apart from the sterling which is falling on EVERY CURRENCY IN THE ENTIRE WORLD. This means that soon our AAA will fall to about-C as our debt is getting huge and 98% of the population are going bust and 80% of all firms are also going bust except for their directors who are paying themselves millions. This will mean that 99% of the country will be bankrupt but the tiny millionaires wont.
The architects of the EU had the illusion that they could overcome the national boundaries of capitalism and bring about economic integration. But, rather than achieving convergence, the euro has sharpened the differences between the national economies. Europe's capitalist crisishas been reflected in the massive movements of the working class that have been taking place, wave after wave - massive public sector strikes, general strikes, mass occupations and protests. As capitalist governments are toppled - as in France, Holland etc - now the Radical Left Coalition (Syriza) is poised to take power in Greece, carried by workers' anger against austerity measures where ordinary working people are expected to pay for the greed of the rich. Failed capitalist parties are being swept aside.