The Rain in Spain

Even as the first Greek act in the developing euro-crisis plays on – now with fatalities, as three people die during violent demonstrations in Athens – the focus of public attention is starting to shift to a feared second act in other countries with similarly weak finances, like Portugal or Spain. With that come calming assurances from high EU officials, like EU Council President Herman van Rompuy (remember him?) who characterized any such fears of financial contagion as “irrational.” Going to the horse’s mouth, though – so to speak – we find them to be anything but, as we can see from an article by Luis Doncel (Spanish risk runs rampant) in the mainstream Spanish paper El País. (The hat-tip for discovering this article goes to Eurointelligence – in English, of course – whose piece itself offers a potpourri of interesting current news items on the Greek crisis.)

Doncel takes as his motif the phrase llueve sobre mojado, or “it never rains but it pours.” Perhaps President Van Rompuy should consider learning Spanish (or maybe pay more attention to his Spanish-speaking aids), although what is now ailing Spain now is quite reportable in numerical terms as well. Like the Spanish stock market index down by 7.5% over only two days. Or the “risk premium” for Spanish government bonds – that is, the difference between the interest-yield they must carry and that of German Bundesbonds, considered the safest Eurobonds possible – multiplying by four in just over a month, to almost two full percentage points (0.6% German; 2.58% Spanish).

In fact, today shapes up to be a particularly “rainy” day for Spanish finances, in that it is the day the government is scheduled to return to the private credit markets to sell more debt, in the range of €2-3 billion. In March it was able to raise €4.5 billion in five-year bonds for 2.84%, while today it is likely to have to pay in excess of 3.5%. (Of course, Greece already was facing a market demanding yields of over 10%, except that the EU’s bailout package means it can stop dealing with private financial markets for a few years – supposedly.)

The Portuguese government had to do the same thing yesterday, borrowing €500 million with 6-month notes at a yield four times what it paid just last March. But at least Portugal did that just in the nick of time to avoid even worse terms, just before the rating agency Moody’s gave public notice that it was considering lowering that country’s rating even further. Apparently it’s throughout the entire Iberian Peninsula that it never rains, but it pours . . .

“The debt market is dried-up, it is broken. Lack of confidence has given way to panic and decisions being taken now have no logic,” that is how one Spanish analyst for Citibank characterizes the present situation. All the while, Doncel notes, isn’t it funny how everything is developing in the Germans’ favor, from the fall in the value of the euro to the fall in the interest rate that that government has to pay to borrow money. While those things may be true, that sort of attitude that everything is happening deliberately, engineered by the Germans, can only be destructive when Eurozone nations have to find some way to work together to resolve the crisis.

Also not helpful: an opinion column whose link is on the very same page as Doncel’s article, written by one Xavier Vidal-Folch and entitled Shark thirsting for blood. I’ll just deal with it briefly here; let me give you the first paragraph (’cause I know you’re mega-curious from that sensational title!):

Like a shark, the financial market seeks out blood. It has almost gobbled up Greece. But it does not let loose its prey, as would seem logical, while it thrusts its teeth in others that are bigger. Only because, with the surgery in Athens completed with pain and with death, there still remain, dispersed, trails of red drops.

Pretty breathless stuff: “The Market is coming to get us!” And again, provided to us by El País. Perhaps they really are starting to panic in Spain.

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