Brussels, 05/04/2012 (Agence Europe) - As an illustration of the fact that Spain's economy is of concern to the money markets despite the strict austerity measures set out in the country's budget for 2012, the interest rates charged on Spain's ten-year debt rose again on Thursday 5 April 2012 to just below 6%, the level last seen in December ahead of the European Central Bank's first LTRO (mass injection of cash into European banking system). Similar concerns have also led to a hike in Italy's yield.
Spanish economy minister Luis De Guindos said the nervousness on the markets was due to doubts about economy growth in Europe. He is quoted by Spanish newspaper El Pais as saying that there is a clear solution - continuing with the budget consolidation agenda and reforms like the new labour law and the law concerning the financial industry to lay the foundation for future growth.
The European Commission is currently examining Spain's draft budget, which was unveiled on Monday to the Spanish parliament and is expected to unveil its findings after Easter (see EUROPE 10588). The draft budget aims to cut the country's deficit from 8.5% to 5.3% of GDP in 2012 by means of spending cuts of €27 billion and expects Spain's public debt to be around 80%, up from 68.5% in 2011. On Wednesday, Madrid had to pay higher interest on its first bond issue after publication of the draft budget. An emission of €2.6 bn-worth of 3, 4 and 8 year bonds was described as a failure by commentators. The interest rate demanded for four-year bonds shot up to 4.3%, 1% more than for the most recent equivalent emission. Spain has already rolled over half of its long-term debt. (MB/transl.fl)