SPAIN’S stock market yesterday suffered its worst day in more than two years despite eurozone finance ministers giving the green light for a €100 billion (£78bn) bail-out of the country’s banks.
The agreement came as investor concerns on the stability of Spain’s economy, and that the government itself might need rescuing, sent the country’s borrowing costs soaring and stock prices plummeting.
Spain’s main Ibex index closed down 5.8 per cent – its biggest one-day percentage drop since May 2010 – while the interest rate on the country’s ten-year bond moved further above the 7 per cent rate seen as unsustainable. In London, the FTSE 100 dropped 1 per cent and the pan-European DJ Eurostoxx 50 fell almost 3 per cent.
Finance ministers yesterday signed off a document that calls for strict monitoring of the banks that receive aid. It also requires the Spanish government to present plans this month to reduce its budget deficit to under 3 per cent of GDP by 2014.
The agreement calls for an initial disbursement of €30bn this month. The full amount of money needed to shore up Spain’s banks will not be known until September.
Spanish banks are saddled with huge losses from soured property investments and the country’s government – which cannot afford to rescue them itself – last week passed austerity measures, including tax hikes and cuts to benefits, salaries and pensions, to reduce debt and strengthen confidence.
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Weather for Edinburgh
Tuesday 21 May 2013
Temperature: 6 C to 17 C
Wind Speed: 12 mph
Wind direction: North east
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Wind direction: North west