Spanish Bailout Hopes Extend European Markets

Devan Biswas
02 Oct, 2012
New York City

European markets extended gains for the second day on the hopes that Spanish bailout is in works and may be finalized as early as this weekend. Greece and troika inspectors struggled to finalize austerity steps before the release of next bailout tranche. The euro edged higher from a three-week low.

[R]2:30 PM Frankfurt – European markets extended gains for the second day on the hopes that Spanish bailout is in works and may be finalized as early as this weekend. Greece and troika inspectors struggled to finalize austerity steps before the release of next bailout tranche. The euro edged higher from a three-week low.[/R]

European markets extended gains for the second day in a row on the hopes that European leaders and Spain are working to finalize a larger bailout.

Spain has replaced Greece, Ireland and Portugal as the main threat to the euro zone and the euro.

The difficult negotiations have cast a long shadow on the bond market and the yields of Italian and Spanish bonds have been volatile in the recent days.

The latest report from an independent agency on how much Spanish banks need capital helped Prime Minister Mariano Rajoy more time as he faces intense pressure to accept a bailout with conditions.

Markets around the region traded higher. FTSE 100 index gained 0.3% to 5,837, the DAX index added 0.4% to 7,353, and CAC 40 index edged up 0.2% to 3,443.

The benchmark index in Madrid jumped more than 0.8% on the hopes that the nation is preparing to accept bailout as early as this weekend.

Separately, Greece faced more protests as troika inspectors and finance ministry struggled to finalize the details of austerity measures before the release of the next installment of loans on Monday.

Greece is resisting the demand to implement additional 2 billion euros of spending and asking for more time but the IMF is resisting.

Slovenia is preparing to float its delayed bond offering of 1.5 billion euros in the next three weeks of bond yields continue stay near 6% after reaching a high of 7.6% in August.

Slovenia, once the star of the euro zone member nations has been struggling with the falling economic activities, a surge in budget deficit above 4.2% and rising bank defaults in the last two years.

Slovenia is likely to be forced into accepting its own bailout as early as next month if bond market window fails to open as the government struggles with falling revenues.

The head of the Eurogroup of finance ministers Jean-Claude Juncker said last month that the situation in Slovenia “is serious” and the country has “no time to lose.”

Slovenia’s government is struggling to corral support to pass a measure that prevents referendums on budget, human rights and defense issues in the future.