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Spain dodged fallout Thursday from Portugal’s request for a bailout, with Spanish Finance Minister Elena Salgado insisting that her nation is not next in line for international help.Markets appeared to agree, but a protest by young Spaniards against the nation’s anti-austerity measures that have shielded it from turning into the next bailout candidate turned violent after police clashed with demonstrators. At least one protester was hurt.
Earlier, investors buying Spanish debt accepted lower interest rates in an auction of three-year bonds seen as a first test of Spain’s financial health after Portugal announced Wednesday it would seek a long-predicted rescue package it was desperately trying to avoid.
The Spanish Treasury said it sold euro 4.13 billion ($5.9 billion) Thursday morning at an average interest rate of 3.57 per cent, down slightly from 3.59 per cent in the last such auction March 3.
Salgado told the Cadena Ser radio station that outside help for the eurozone’s fourth largest economy “is absolutely ruled out” because the Spanish economy “is more diversified, more powerful with sound basics, and is much more competitive” than Portugal’s.
Portugal’s bailout request also appeared to have little impact on Spain’s borrowing rates in the secondary market. In afternoon trading, the yield on Spain’s 10-year bonds was at 5.27 per cent, up marginally from 5.21 per cent on Wednesday. The spread, or difference, with Germany’s equivalent rate was stable at 182 basis points, indicating investors are not any more worried about the country’s finances.
Spain’s main stock index, meanwhile, was up 0.1 per cent in afternoon trading.
Despite the positive news for the eurozone’s fourth largest economy, analysts said Spain’s outlook is still shaky and will depend largely on whether the country’s troubled savings banks — called “cajas” — can raise money to meet new core capital ratios set by the government.
The Bank of Spain said in February that the cajas are holding about euro 100 billion ($143 billion) in “potentially problematic” property assets, the result of loans gone bad leftover from Spain’s extended construction boom that turned bust two years ago.
“The coming weeks and months will be key in determining whether the market views Spain to be in the clear,” said Jane Foley, an analyst at Rabobank International.
But few economists think Spain is in line to become the fourth member of the eurozone’s bailout club anytime soon, thanks to a raft of unpopular austerity measures pushed through by the Socialist government, including tax increases, public sector wage cuts and the raising of the retirement age from 65 to 67.
“Spain will not have the same problems as Portugal has been facing because it has been addressing those problems for quite some time,” said Angel Gurria, secretary general of the Paris-based organisation for Economic Cooperation and Development.
Dan Seiver, a finance professor at San Diego State University, said there is now a much lower risk that speculators will target other nations in the eurozone, because the weakest countries have received — or are about to receive — bailouts.
Nevertheless, Spain faces extremely difficult times in the years ahead. Unemployment stands at eurozone-high 20 per cent with grim growth prospects.
Thousands of young Spaniards demonstrated Thursday night against the austerity measures in Madrid, waving signs that said “Youth With No Future, Youth With No Jobs, Youth With Nothing for Retirement.”
The protest started peacefully, but turned violent later after 500 demonstrators grabbed metal fences used to divert traffic and threw them across one of Madrid’s most stately avenues to block traffic. They also hurled debris at police vehicles.
Police wielding batons intervened, beating demonstrators in a melee that sent the protesters scattering for cover.
A photographer for The Associated Press captured an image of one protester, his head bloodied, being detained. Officers at the scene declined comment on whether there were arrests and the nature of any injuries.
Before the fracas, protesters said they were marching because Spain’s austerity measures have left them with a grim future.
“The measures they are putting in place to get out of the crisis are only going to increase inequality,” said university student Enrique Valdivieso, 25. “This situation affects young adults the most, and we’re stuck in the most precarious situation possible: We’re studying but we have no future.”
Protester Carlos Rodriguez said he’s a trained graphic artist, but can’t find a full-time job so he still lives with his parents while scrapping for freelance work.
“With what I make I can’t even rent a room,” he said. “We’re qualified but we can’t work. Something has to change.”
During the construction boom, with housing prices rising steadily and homes seeming like golden investments for many Spaniards, droves purchased apartments and houses with banks often financing 100 per cent or more of home purchases.
Miguel Castillo, a 40-year-old furniture store owner, said his sales are about half of what they were several years ago now that most Spaniards have reduced purchasing power or are simply scared to spend.
“We went into more debt than we should have. We lived like rich people when we should not have. They gave money away, and now we have to pay it back,” said Castillo.
Daniel Woolls and Jorge Sainz in Madrid and Gabriele Steinhauser in Budapest, Hungary, contributed to this report.
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