Brussels, 29/07/2011 (Agence Europe) - One week after the eurozone summit which set out the terms and conditions for the second bailout package for Greece, the period of respite given to the sovereign debt markets of the euro area countries is once more giving way to investor concern (see EUROPE 10424). The US rating agency, Moody's, placed the Spanish rating (Aa2) under surveillance on Friday 29 July, with a view to possibly downgrading it. It justifies this decision by the rise in the Spanish state's financing costs. Another reason given is the weakness of the Spanish economy, as unemployment remains high there despite structural reforms carried out. Moody's also points a finger of blame at the worsening situation of regional public finance, as several Spanish authorities have announced they will no longer be able to comply with the indebtedness limits imposed by the government. “This is not good news”, the Spanish minister, Elena Salgado, admitted on national radio on Friday. In a letter to investors, the Spanish debt agency denounces the short-term vision of the US agency which generates a vicious circle. “We should like to remind investors that Spain's average loan cost in 2011 is 3.6% and that the low public debt/GDP ratio places us at the same level as the strong European countries with AAA rating”, she said. Spain's Prime Minister José Luis Rodriguez Zapatero announced the same day that, on Sunday 20 November, early legislative elections would be held. Spain has set itself the target, for 2011, of reducing the public debt to 6% of GDP compared to 9.2% in 2010.
On Thursday, there was a further leap in interest rates during the issue of nearly €8 billion in Italian medium and long term securities. The premium for ten-year securities has risen to 5.8% from 4.94% during the last issue end June - despite the €47 million austerity plan by 2014 that Rome adopted in early July to bring the national deficit down below the 3% market of GDP by 2012. Finance Minister Giulio Tremonti is even tarnished by a scandal targeting the country's construction companies that carried out public contracts in exchange for favours to the benefit of one of his close fellow-workers.
In Greece, discussions have begun between the public authorities and the private sector on implementation of private sector participation, which could amount to €54 billion by 2014, in the costs of the rescue package. “We hope the operation will begin immediately and that it will be as brief as possible”, the Greek finance minister, Evangelos Venizelos said, as reported by AFP. It should also be noted that the troika (Commission, ECB and IMF) has begun, in Lisbon, its first assessment mission of the austerity programme that Lisbon is setting up in exchange for financial aid of €67.5 billion. (M.B./transl.jl)