Spain is facing the gravest danger since the end of the Franco dictatorship as the country is frozen out of global capital markets and slides towards an epic showdown with Europe.
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A screen displays the IBEX 35 at Madrid's stock exchange on Wednesday. Photo: AFP
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By Ambrose Evans-Pritchard
“We’re in a situation of total emergency, the worst crisis we have ever lived
through” said ex-premier Felipe Gonzalez, the country’s elder statesman. The warning came as the yields on Spanish 10-year bonds spiked to 6.7pc,
pushing the “risk premium” over German Bunds to a post-euro high of 540
basis points. The IBEX index of stocks in Madrid fell 2.6pc, the lowest
since the dotcom bust in 2003.
Chaos over the €23.5bn rescue of crippled lender Bankia has led to the abrupt
resignation of central bank governor Miguel Ángel Fernández Ordóñez, who
testified to the senate that he had been muzzled to avoid enflaming events
as confidence in the country drains away.
Markets are on tenterhooks as Spanish yields test levels that forced the European Central Bank to respond last November with its €1 trillion liquidity blitz. “Nobody is short Spanish debt right now because they are expecting ECB intervention,” said Andrew Roberts, credit chief at RBS. “If it doesn’t come -- if we take out 6.8pc -- we’re going to see a hyberbolic sell-off,” he said.
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