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Spanish Borrowing Costs Hit an Unaffordable Rate

in International Business

Spanish Borrowing Costs Hit an Unaffordable Rate

The yield or interest rate on Spanish 10-year bonds hit 7%, a level that market-watchers consider is unaffordable for a country to raise money on the bond markets in the long term.

Spain is now at a critical point where once Greece, Ireland and Portugal all sought an international bailout.

The yield indicates the interest rate a government would have to pay to raise money from financial markets when it holds bond auctions. While Spain can afford the high rates for a few weeks at least, it would find them too expensive in the longer term.

Details of the bailout of Spain’s banks are expected from Eurozone ministers, who will meet on Monday.

But an official with Spain’s economy ministry said last week that the meeting of euro zone finance ministers was not expected to generate a figure for how much Spain would tap. Ministers planned to discuss terms of the loan and may or may not finalize some of them at the evening session, said the official, who spoke on condition of anonymity in keeping with policy.

Spain’s high borrowing costs will be a blow for the Eurozone to handle, as the country’s economy is the 4th largest among 17 nations that use the common Euro currency and it is also larger than those of Greece, Ireland and Portugal combined.

Tags assigned to this article:
Spain bailoutSpain borrowing costsSpanish Banks

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