Spanish borrowing costs surge

| November 29, 2010 | 0 Comments

Fears of contagion were raised again today after Spain’s borrowing costs surged to 5.330% from 5.148% - an eight-year high.

Markets are nervous about the current euro zone situation and fears are growing that Spain and Portugal could be next in line for a bailout as yields on 10-year bonds rise to dangerous levels – mimicking what happened in Greece and Ireland – just before they were forced to seek emergency aid.

However, while a bailout for Portugal would be much less than €85 billion that Ireland has sought, bailing out Spain would require a much larger sum, according to analysts.

The Spanish economy accounts for 12% of economic output among the 16-member bloc – equivalent to twice that of Ireland, Portugal and Greece combined.

Spain is also battling to bring its public deficit down to 6% of GDP in 2011, while the economy continues to suffer with high unemployment as its rate continues to hover around the 20% mark.

In related news today, US economist, Nouriel Roubini, said in an interview published in business daily Diario Economico that “a bailout for Portugal is becoming increasingly likely”.

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