By Peter Lavelle
It’s been on the cards for some weeks, but has the moment come at last? The euro is half a cent ahead of the US dollar this afternoon, in part on reports that Spanish economy minister Luis de Guindos has discussed requesting a €300bn bailout for Spain, with his German counterpart Wolfgang Schaeuble. The discussion between the two took place on Tuesday, when Spanish bond yields were at their worst at 7.6% (they’re now at 6.6%, in large part because of Mario Draghi’s promise to do “whatever it takes” to save the euro.)
Of course, German officials “strongly deny such plans,” while the source who leaked this story claimed that “Germany was not comfortable with the idea of a bailout now.” Yet it seems ever closer. So will it help or hurt the euro? For instance, though the euro is up half a cent now, a Spanish bailout would exhaust the Eurozone’s rescue fund. What happens to Italy in that case, or Greece if it needs further aid? And how would the markets react to Spain’s debt burden being inflated 30.0% at a stroke? In short, though sentiment is upbeat now, this would by no means last if de Guindo’s request became official. Worth keeping an eye on.
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To find out how this data has affected your foreign exchange transactions, call us on +44 (0) 1494 671800 or email enquiries@purefx.co.uk. You can also visit us at foreign exchange specialist Pure FX. We’d be delighted to help with your enquiry.
27 July 2012
€300bn Spanish Bailout to Hurt or Help the Euro?
By Peter Lavelle
It’s been on the cards for some weeks, but has the moment come at last? The euro is half a cent ahead of the US dollar this afternoon, in part on reports that Spanish economy minister Luis de Guindos has discussed requesting a €300bn bailout for Spain, with his German counterpart Wolfgang Schaeuble. The discussion between the two took place on Tuesday, when Spanish bond yields were at their worst at 7.6% (they’re now at 6.6%, in large part because of Mario Draghi’s promise to do “whatever it takes” to save the euro.)
Of course, German officials “strongly deny such plans,” while the source who leaked this story claimed that “Germany was not comfortable with the idea of a bailout now.” Yet it seems ever closer. So will it help or hurt the euro? For instance, though the euro is up half a cent now, a Spanish bailout would exhaust the Eurozone’s rescue fund. What happens to Italy in that case, or Greece if it needs further aid? And how would the markets react to Spain’s debt burden being inflated 30.0% at a stroke? In short, though sentiment is upbeat now, this would by no means last if de Guindo’s request became official. Worth keeping an eye on.
Get in touch
I do hope this post has been of interest.
To find out how this data has affected your foreign exchange transactions, call us on +44 (0) 1494 671800 or email enquiries@purefx.co.uk. You can also visit us at foreign exchange specialist Pure FX. We’d be delighted to help with your enquiry.