Spain is the 12th largest economy in the world, and if it were to have a full-blown sovereign debt crisis, it would make Greece look like a minor headache. And financial markets seem more afraid than ever that the country’s damaged banks will wreck the nation’s balance sheet, requiring a foreign intervention.
It was an awful day for Spain on both the equity and sovereign debt front.
The benchmark IBEX stock has fallen about 2%.
Meanwhile, the 10-year yield hit nearly 6.5%.
The big news in Spain concerns the bailouts of Spanish banks… PM Mariano Rajoy today announced plans for a 19 billion EUR bailout of the Spanish bank Bankia, which itself was an agglomeration of weaker banks.
He insisted that no banks or regions would fail, and he denied that the country’s financial institutions would need any outside rescues.
Spain is clearly the #1 story of the moment.
With borrowing costs where they are, the status quo is unacceptable.