CONCERNS have heightened that Spain may need bailing out after it was forced to pay the second-highest yield on short-term debt since the birth of the euro.
The development came as the credit rating agency Moody’s also threatened to downgrade Germany’s triple A status undermining hopes that it could lead a recovery in the 17-country eurozone.
Furthermore, the troika – three top EU officials – sent to look at whether Greece should receive the last €31.5 billion of its bail-out funds reported that the country cannot pay its debt and further restructing is required.
Spain’s woes came as Catalonia, the largest region, announced it would need central government money to help it pay its €5.6bn of debt. This followed Valencia making the same plea on Friday.
However, EU concerns were more immediately focused on Greece which is once again under threat of defaulting. Prime minister Antonis Samaras said Greece’s economy could contract by more than 7 per cent this year, pushing debt-cutting targets further out of reach, but he pledged to stay the course.
“There are certainly delays in this year’s agreed programme, and we must quickly catch up,” he told party colleagues. “Let’s not kid ourselves, there is still big waste in the public sector, and it must stop.”
The Spanish Treasury sold the €3bn of three-and six-month bills it was aiming to, though yields climbed; the six-month paper jumped to 3.691 per cent from 3.237 per cent last month.