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Spain denies IMF,EU bailout even as Bond Yields soar and Banks hang on a ECB lifeline

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Spain,European Union and IMF all denied that a Spanish Bailout of Euro 250 Billion was being formulated by the international agencies.There are some people who think that a preventive bailout measure will reduce the ultimate cost of a Spanish Bailout learning from the lesson of the Greek Contagion.However despite repeated rumors,the Politicians have continued denied needing a Bailout even as it become apparent to the Market that Spain will soon need one.Spanish Bond Yields are soaring and the Spain’s CDS is also increasing in lockstep.Spanish Banks are finding great difficulty in funding and remain depedent on Funding from the European Central Bank (ECB) which remains the lender of last resort.

The European markets and the Euro have basically shrugged of the massive European problems temporarily but the Crisis is too big for the Market to ignore for a long time.It will become more and more difficult for Spain as the yields keep going higher (they are already at record levels compared to the spread with German bonds).

Spain’s borrowing costs soar – Yahoo

Spain’s borrowing costs soared Wednesday to another record amid worries over the government’s finances and financial problems for banks in this troubled euro zone country.

The interest rate gap, or spread, between 10-year Spanish bonds compared to their benchmark German equivalent rose by more than 0.10 percentage point to 2.23 percentage points. A growing gap indicates investors think Spain’s debt is getting riskier.

The increase came a day after the European Union warned Spain it would have to enact more austerity measures to meet its deficit-reduction goals: cutting it from 11.2 percent of gross domestic product last year to 3 percent in 2013. For months Spain has been the focus of worries that its public finances might degenerate into a Greek-style crisis. Greece ultimately needed a bailout after being frozen out of credit markets by prohibitive high interest rates.

WSJ is reporting that a weak Euro is helping already strong countries like Germany rather than weak countries like Greece and Spain.Germany’s industrial production and current account surplus is both getting a massive boost from the 20% decline in the Euro.Spain and Greece which have small export sectors are getting no major benefit from the devaluation.

Spain fights rescue rumors ahead of visit from IMF chief – MarketWatch

It’s the rumor that just won’t go away.

In a repeat of actions seen over recent days, the Spanish finance ministry on Wednesday said there is no truth to fresh reports that a bailout package is being planned, just as the International Monetary Fund chief strolls to town later this week.The latest speculation came from El Economista, a Spanish daily that said the European Union, the IMF and the U.S. Treasury have come up with a plan to extend a 250 billion euro ($355 billion) line of credit to help Spain deal with its deficit issues. What’s new in this report is the involvement of the U.S. Treasury and a specific monetary amount. The newspaper cited sources “close to the issuing entity.”

The EU denied the report at a press conference on Wednesday, while the IMF has also denied there is any bailout plan in the works. IMF managing director Dominique Strauss Kahn will meet Prime Minister Zapatero on Friday, one factor that has gotten markets excited that there could be fire behind the smoke.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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