To many observers of the ongoing financial crisis it will not come as much of a surprise that the Spanish government would have to finally bite the bullet and resort to asking for assistance. Its banks are bereft of funds and yesterdays leaked report from the International monetary fund suggested that the banks will need a staggering €40 billion to sort out the mess. Reuters claim the request will come on Saturday, quoting a senior German official as saying: “The government of Spain has realised the seriousness of their problem.”
A number of officials in Brussels and Berlin apparently said that the finance ministers of the single currency area would hold a conference call on Saturday morning to discuss a Spanish request for aid. It is rumoured that the plea for help comes after the credit rating agency Fitch cut Madrid’s credit rating by three notches, dropping it to BBB on par with the likes of Azerbaijan.
Calls for action have become increasingly louder over the past few weeks and it may be the concentrated pressure of dozens of finance ministers, experts and investors that has forced Rajoy’s government to concede defeat.
However, The Spanish government are denying the claims claiming that they are waiting for the independent audit of the embattled nation’s banks to be completed before it decides on its next course of action. We have heard all of these denials before from struggling governments desperate to save face so it is expected that the government will say one thing and the opposite will happen.
The timing for such a bailout is ideal as today marks the beginning of the European football championships and no doubt the Euro leaders are hoping that Spain’s football mad but already disgruntled population will be too distracted by the footy to notice a bailout deal being carried out.
The German chancellor Angele Merkel repeated her country’s position that it was up to Spain to make an application for assistance.
“We have everything we need for a stable Eurozone and it is up to the individual countries to come to us. That has not happened,” she said.
A European Commission spokesman said he could not confirm reports of a request for aid, but said they were ready to help. “Should there be such a request the appropriate instruments are in place ready for use.”
Elsewhere in Europe the French national bank was predicting a grim future for the economy changing its growth figures to that of contraction over the next year. Italy posted dismal production figures suggesting that the whole of Europe accept for Germany and Austria were on course for a tough recession.
Despite all of the bad news the Euro remained relatively calm on the markets today only weakening slightly against the pound.
The Pound to Euro exchange rate is currently trading at 1.237
The Pound to US Dollar exchange rate is currently trading at 1.540
The Euro to Australian Dollar exchange rate is currently trading at 1.263
The Euro to US Dollar exchange rate is currently trading at 1.245
The Euro to Pound exchange rate is currently trading at 0.807
The US Dollar to Japanese Yen exchange rate is currently trading at 79.321
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