The move followed yet another sovereign credit downgrade and coincided with fresh evidence Thursday of economic and financial stress as the decline of Spanish housing prices accelerated to a 12.6% annual rate in the first quarter and Spanish banks increased their reliance on European Central Bank funding.
Coming just a few days after Spain was forced to seek a European-Union bailout for its banks of up to €100 billion ($125.57 billion), the new raft of bad news sent Spanish borrowing costs soaring. The yield on Spain's 10-year government bond rose to as high as 6.96%, a new euro-era record and a sign that demand for Spanish debt is rapidly drying up. If Spain cannot find enough investors to buy its bonds, it will need to seek a bailout.
Late Wednesday, Moody's Investors Service became the latest ratings agency to downgrade the beleaguered Iberian nation's debt, increasing speculation that a bailout for the Spanish government might follow that of its banks. The three-notch downgrade left Spain's rating one level above junk, as Moody's highlighted the increase to the country's overall debt burden arising from the proposed bailout of Spanish banks.Progressive compassion and cheap money has killed the Spanish economy. There's nothing to cheer about there. Real people are going through real hardship.
|John Woodward Philip said it during the Battle of Santiago de Cuba, but he could be saying it right now about Spain and the rest of the Eurozone.