How much more can Spain take? The US dollar has claimed almost a cent from the euro this afternoon, as the government of Spanish region Valencia turns to Madrid for aid. This has spurred concerns that, before long, Spain might be forced to request a full-scale bailout from the Eurozone.
Valencia’s woes stem from the fact that, alongside Catalonia, it’s the most indebted part of Spain (where the regions are semi-autonomous.) Given this, it’s been locked out of the financial markets for some months, and now needs central government money to fund itself. This, of course, will increase the burden on Spain already-struggling central government.
On the other hand, you might be surprised that such a small event could spark this sell-off on the euro. Valencia is but one of Spain’s 17 regions, yet the euro has shed almost a cent. This is because, as Adam Cole at RBC Capital Markets notes, Valencia is “a reflection of broader negative sentiment.” In other words, the bias was already against the euro, and this just gave the markets an excuse.
Of course, if you’re in the US and planning to buy a property in Europe, this is good news indeed.
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