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With risk premiums at their highest levels ever in Spain and the Italian economy tanking, speculation abounds that both could be next on the list for an ECB bailout.Brussels says a bailout option is “certainly not on the table.”
Chantal Hughes — spokesperson for the EU commissioner for Internal Market and Services — assured reporters that mechanisms were in place to help Spain and Italy meet rising funding costs, and that the EU has “full confidence” in the actions of Spanish and Italian
However, El Mundo speculates that a bailout might not be far away for either country:
“Experts mark the critical level for an economy to seek external aid by risk premium — which measures the difference in price between a Spanish 10-year bond and its German equivalent — at 400 points with yields of these bonds at 7%…Two weeks after the interest on [Portuguese and Greek] debt topped 7% [each country] received a bailout.”
Yields on Spanish and Italian 10-year bonds reached more than 6.45% and 6.25%, respectively, in early trading before easing later in the day.
Spanish Prime Minister Jose Luis Rodriguez Zapatero cut his vacation early to handle the situation, while Italian Finance Minister Giulio Tremonti called an emergency meeting in Rome.
Hughes added that Cyprus will not see rescue loans either, despite the precarious state of its finances and its massive exposure to Greek debt.