Uncertainty in Greece pushes up cost of borrowing in Spain

 

The Spanish Minister of Finance, Elena Salgado, has reiterated that the country will not require a financial bailout from the rest of the EU. However, she did admit that had concerns over the significant rise in the cost of borrowing that Spain is currently facing.

Recent polls suggest that the ruling PSOE administration will lose to the PP opposition in the general elections, planned for March 2012 at the latest, but is nonetheless attempting to persuade investors that it can restructure the economy and avoid the need for a bailout.

Spain's 10-year bond yield increased to 5.77% today - the highest in over ten years - as the cost of insuring against default on European sovereign debt rose to a record level.

The situation in Greece and their inability to gain support for their austerity measures is causing Spanish borrowing costs to rise, however there should be some clarity once the result of a vote by the Greek parliament on the issue is made known on Wednesday.