Disappointing Bond Auction Knocks Confidence in Spanish Economy

(photo by aranjuez1404)

The Spanish economy took another slap in the face today, and with it so did the Government who had hoped that their defiance in the face of violent ant-cuts protestors last week would signal strength of purpose.However the markets once again had different ideas. In the first auction of government bonds since the announcement of the Government’s austere budget for 2012, the Ministry of the Economy sold €2.5 billion in three-, four- and eight-year bonds despite aiming to sell between €2.5 – €3.5 billon.

In a rallying call to those who oppose his proposed budget, Prime Minister Mariano Rajoy said today:

“Spain is facing an economic situation of extreme difficulty, I repeat, of extreme difficulty, and those who do not understand that are fooling themselves.”

He also went on to raise the threat of Spain requiring an international bailout should his budget plans falter altogether. Stressing that although “no on likes” the budget his Government announced last week, he added “the alternative is infinitely worse”.

To add to this disappointment, Spain’s risk premium rose its highest level since the Partido Popular took office in December. The stock markets also took a hit, with the Ibex 35 closing down more than 2 percentage points.

 

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