Spain’s borrowing costs are likely to see a new high today as the country waits to see the results of independent debt tests conducted by US and German auditors who have been studying the balance sheets of the country’s failing banks.
The government will be looking to borrow a rather modest two billion euros this morning by way of a bond auction but with their borrowing costs already close to 7% and likely to rise analysts warn the bailout may not be enough.
It is almost two weeks since prime minister Mariano Rajoy finally buckled and admitted his country needs help and in that short time he has seen his country’s borrowing costs rise from 5% to 7%, the same level that prompted Greece to request a bailout.
Although Spain has not requested a specific amount, choosing to wait until independent auditors have completed their analysis, the IMF has suggested the country requires around 40 billion, while JP Morgan (does anyone still trust what they say?) put the figure closer to 75 billion euros.
Reports suggest that 100 billion euros has been set aside but some are worried about what will happen if the auditors report indicates a far greater requirement. Europe has hinted that it will give Spain the money it needs plus a little bit more to cover unforeseen circumstances. How much is “a little bit more”?
New French president Francois Hollande said Spain’s high borrowing costs are unacceptabe and Europe must show “a much faster ability to intervene”.
Spain are expected to make a formal request for help at a meeting of Euro zone finance ministers in Luxembourg this evening.